Fund managers in China are forecast to roughly double their assets under management from $7.4 trillion this year to $14 trillion over the next five years as regulations shift on the mainland, according to a new report from consultancy Oliver Wyman.
The China figures fall far short of the size of U.S. and European markets, which made up much of the $84.9 trillion of assets under management in 2016, according to PricewaterhouseCoopers. But there could be broader implications for the make-up of the Chinese asset management industry.
When accounting for “quasi” asset managers, which are not traditional managers by global standards, the total size of the Chinese market stood at $18.8 trillion this year, Oliver Wyman said.
Growth in the level of assets under management in China comes as total investable wealth among high-net-worth individuals in the country has increased. That figure is projected to rise to $17 trillion by 2022 from $8 trillion in 2016, the report, released last week, said.
Recent shifts in regulations in China are one of the major forces driving changes in the market.
“Asset management regulation has … basically constrained the further development of ‘quasi’ asset manager and moved the industry towards a more healthy and professionalized active product management that will really help the industry to grow in the right direction,” Ray Chou, a Shanghai-based partner at Oliver Wyman, told CNBC.
Examples of those regulatory changes include the removal of promises to investors guaranteeing principal repayment, and the prohibition of product nesting in the space. The latter refers to the practice where funds from bank wealth management products are further allocated into more than one layer of other financial products managed by different asset managers.
Courtesy: Oliver Wyman
While those regulations are expected to see asset managers grow their share of the asset management industry, “quasi” asset managers, including bank wealth management products, are likely to be on the losing end of the development in the immediate term.
Correspondingly, asset managers are expected to see their share of the industry grow to as much as 50 percent in 2022 from 39 percent currently, the report said.
While the market reforms were seen as a positive development, with further opening expected, Chou acknowledged that timing in the execution of such changes is difficult to predict with certainty.
“It’s not going to change overnight, but it’s already a change in the market where you see a certain segment being opened up,” Chou said.