Fidelity International Applies to Set Up Wholly Owned Mutual Fund Subsidiary in China

Global asset management giant Fidelity International has applied to set up a wholly owned mutual fund subsidiary in China, making the firm the third foreign institution to do so after BlackRock Inc. and Neuberger Berman Group LLC, as access to the country’s lucrative fund market has widened.

China has been accelerating the liberalization of its financial markets over the past few years. That meets demand from global financial institutions eager to get a piece of the country’s multitrillion-dollar asset management industry and other sectors.

Fidelity said in a Tuesday statement that it has submitted the application to the China Securities Regulatory Commission (CSRC), the country’s top securities regulator.

“The application for a mutual fund license is an important milestone in our China strategy,” Daisy Ho, Fidelity International’s China president, said in the statement. She said the company “will continue to devote resources to expand our capabilities and develop more solutions based on Chinese investors’ needs to help them achieve their investment and retirement goals.”

If Fidelity is granted the license, it will be able to sell investment products to individual customers across China. The asset manager currently operates four privately managed funds in China, which target mostly institutional clients and a limited number of wealthy individual investors. In 2017, Fidelity became the first foreign institution to set up a wholly owned privately offered fund company in China after obtaining regulatory approval.

To protect the country’s comparatively young financial industries, the Chinese government previously restricted how much of a stake foreign investors could have in local financial firms. In November 2017, China promised to allow foreign investors to own up to 51% of any joint venture in the mutual fund industry, as well as the securities futures industries, according to a consensus that China and the U.S. reached during U.S. President Donald Trump’s visit to Beijing.

In July 2019, China said the foreign ownership cap would be abolished by 2020. In October that year, the CSRC said (link in Chinese) the cap for mutual fund companies would be scrapped on April 1.

On April 1, American investment giants BlackRock and Neuberger Berman became the first two foreign institutions to apply to set up wholly owned mutual fund businesses. A few days later, JPMorgan Chase & Co. announced it had reached an agreement with its Chinese partner to take full ownership of a mutual fund joint venture.

As of April, China had 143 (link in Chinese) mutual fund management companies overseeing assets (link in Chinese) worth 16.6 trillion yuan ($2.3 trillion), including Sino-foreign joint ventures, according to the Asset Management Association of China, an industry group.

Contact reporter Tang Ziyi (ziyitang@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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