Citic Securities Plans $464 Million Asset Management Unit

Citic Securities Co. Ltd., China’s largest brokerage, plans to set up a new wholly owned asset management subsidiary, signaling its intention to join a parade of rivals expanding into the mutual fund management business.

Citic Securities’ board agreed to invest as much as 3 billion yuan ($464 million) to set up a new unit to take over the company’s asset management businesses, the unit of state-owned Citic Group Corp. Ltd. said Monday. According to a plan approved by the board, the new venture’s business scope will include management of securities assets and publicly raised securities investment funds. Managing the publicly raised funds will require license approval by regulators, according to the plan.

A person close to the company said the new asset management business plan is still in an early stage and subject to approval by the company’s shareholders and regulators. Regulators have been supportive of brokerages’ plans to set up asset management subsidiaries, the person said.

A total of 19 securities companies in China have obtained licenses to set up independent asset management units, including Guotai Junan Securities Co. Ltd., Huatai Securities Co. Ltd. and Haitong Securities Co. Ltd.

One securities company executive said brokerages are setting up asset management units in hopes of better managing risks, creating more room for equity incentives for employees and preparing to apply for mutual fund management licenses.

China’s top securities regulator signaled support for brokerages to expand their business in a bid to empower domestic players in the intensifying competition with global giants. Draft rules issued by the China Securities Regulatory Commission (CSRC) in July relaxed restrictions on securities companies’ investments in mutual fund management businesses.

The CSRC greenlighted 14 securities companies or their subsidiaries to tap into the mutual fund management business, with Guotai Juan’s asset management arm as the latest one.

Citic Securities managed 1.42 trillion yuan of assets by the end of June, ranking tops among all brokerages in the country.

Contact reporter Han Wei (weihan@caixin.com) and editor Bob Simison (bobsimison@caixin.com).

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