5
China: The World’s Best Opportunity for Asset Managers?
| Executive Summary
• Insurers will be the key growth area
among institutional investors. They
are the stop-gaps for an incomplete
and underfunded national pension
system. Pension-linked policies are
the major driver of their offshore
and onshore investments.
Distribution Dynamics
• Although China has an open
architecture for fnancial product
sales, banks are by far the
dominant channel and will remain
so for the foreseeable future.
Expect only narrow specialists to
emerge as a distribution alternative
in the next decade.
• In China, products are bought,
not sold. Worse, buy-and-hold
strategies are uncommon and
considered unwise. As a result,
marketing and reputation
management are signifcantly
less effective than in the West.
Investors will remain extremely
fckle and quick to churn.
• Foreign banks will become fund
distributors in the near future,
although most will have diffculty
breaking into the retail market.
To facilitate partnerships with
fund managers, foreign banks will
frst need to attract much larger
numbers of HNWIs, requiring
considerable investment in
relationship development.
Expanding Internationally
• Greater China will soon become its
own distinct asset class, separate
from “BRICS” or emerging markets.
Global investment portfolios will
shift to gain more exposure to this
market. Chinese managers — with
government support — enjoy the
best position to exploit this change.
• Offshore subsidiaries of Chinese
fnancial frms should be much
higher on their global competitors’
radar screens. No foreign frm will
be able to equal their access to
the domestic Chinese market in
the next ten years. Expect them
to expand quickly from Hong Kong
to control large portions of the
Greater China investment market.
• Demand for foreign investment
options, motivated by an acute
need for diversifcation, is running
far ahead of regulators’ control.
Near-permanent Chinese interest
in real estate, private equity
and absolute returns should be
assumed. Regulators will move
quickly to create manageable
channels for this money to reach
qualifed managers.
“Although China has an open architecture for fnancial product
sales, banks are by far the dominant channel and will remain so
for the foreseeable future.”