Caixin
Nov 23, 2020 02:19 PM
FINANCE

Invesco Seeks $100 Billion in Assets to Defend China Top Spot

A man flies a kite on the Bund while buildings of Pudong's Lujiazui financial district stand across the Huangpu River as the sun rises in Shanghai on Oct. 2, 2015.  Photo: Bloomberg
A man flies a kite on the Bund while buildings of Pudong's Lujiazui financial district stand across the Huangpu River as the sun rises in Shanghai on Oct. 2, 2015. Photo: Bloomberg

(Bloomberg) — Invesco Ltd. is aiming for growth of more than 40% in its China assets in three years, seeking to defend its leading position among foreign managers by leveraging its years of local experience as more rivals like BlackRock Inc. and Amundi SA step up their forays into the Chinese market.

The $1.2 trillion asset manager aims to boost Chinese clients’ assets under management to $100 billion by 2023, from about $70 billion currently, according to Andrew Lo, head of Asia Pacific. The growth will mostly come from onshore mutual fund joint venture Invesco Great Wall Fund Management Co., its primary focus in China, where Atlanta-based Invesco is making “progress” in boosting its ownership to 51% to finally gain control, he said.

Competition in China’s 100 trillion yuan ($15.2 trillion) asset management market is heating up, with five global players from BlackRock to Neuberger Berman having won approval or applied for wholly-owned fund licenses after China eased restrictions in April. BlackRock and Amundi have also set up wealth management joint ventures with major local banks to expand their reach to Chinese investors. While Invesco is keeping “an open mind” in forging other local alliances, it’s focused on tapping and building the joint venture’s 17-year reputation among clients and its understanding of the market, a moat that Lo said can help Invesco compete.

“The biggest difference between us and many of the global competitors is that we’ve been doing this for 17 years,” he said, citing the ups and downs in recent years and competing against implicitly-guaranteed investment products that were only recently banned. “Now I think is really the inflection point.”

Invesco was ranked No. 1 global player in onshore business by consultancy Z-Ben Advisors Ltd. this year, largely thanks to Shenzhen-based Invesco Great Wall, which raised 50.7 billion yuan in mutual funds started this year through mid-August, the most among global players. Overall it ranks No. 3, behind JPMorgan and UBS Group AG.

Invesco, which has been managing the local venture with only a 49% stake, has given the local team more decision-making power than many global rivals, aiding its performance, according to Peter Alexander, founder of Shanghai-based Z-Ben.

Invesco will keep hiring locally, after having added 27 people to the joint venture already this year, with positions ranging from research and fixed-income investment to marketing and digital operations, Lo said, declining to give details on further plans.

The anticipated asset growth could hopefully lift Invesco’s position to be among the 15 largest mutual fund players in China excluding money market funds — the ranking it cares about most — in three years, up from 19 currently, he said. The list is still led by local players like E Fund Management and China Universal Asset Management.

“I don’t think it’s an easy market — There’s a lot of nuances. You have to be very nimble, very quick,” Lo said. “It’s not going be an easy market for new entrants.”

While competition in the local private fund market is also intensifying with UBS and Winton Group leading the way and Ray Dalio’s Bridgewater Associates catching up, Lo said Invesco’s Shanghai-based wholly-foreign-owned venture, which holds the private fund license, mainly functions as an onshore research platform. The business only launched one product after registering three years ago, as compared to 16 at UBS.

Lo declined to say if the company intends to wind it down eventually, which would be required under Chinese regulations should Invesco gain 100% of the mutual fund business.

While Invesco faces cost pressures globally, China is a major growth opportunity to the company and would see resources added, he said. The firm may apply for a mutual fund advisory license, which has enabled Vanguard Group to tap the fund market without its own onshore fund management business.

Invesco is also planning some ETF products to tap global investors’ growing interest in investing in Chinese assets, which could grow its inbound business from about $80 billion currently, although the onshore business remains the “biggest pie.”

China is “an extremely exciting market for many years to come for fund managers,” with good growth expected from retail, institutional to digital and advisory businesses, Lo said. The company’s three-year target is “not easy, but realistic.”

Contact editor Yang Ge (geyang@caixin.com)

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