JPMorgan poised to take control of Chinese asset manager

JPMorgan poised to take control of Chinese asset manager

JPMorgan’s fund arm is a share purchase away from becoming the first foreign group to take control of an asset manager in China, after its joint venture partner in the country put 2 per cent of their business up for sale.

Shanghai International Trust revealed it would auction the stake in China International Fund Management in a stock exchange statement on Wednesday. Analysts expect JPMorgan Asset Management to snap up the offering.

A sale to JPMorgan would raise the US company’s stake to 51 per cent while reducing its Chinese partner’s holding to 49 per cent. Reforms last year allowed foreign businesses to take a 51 per cent stake in Chinese fund managers for the first time, stoking speculation that some foreign asset managers with minority stakes in joint ventures could move to obtain controlling positions.

JPMorgan on Wednesday declined to comment on the sale but it had previously said it wanted to increase its stake in the joint venture. Taking control would give it first crack at a huge market — a report this month by Morgan Stanley and consultancy Oliver Wyman forecast that the pool of assets sourced from Chinese clients would increase from $5.3tn to $9.3tn as early as 2023.

Peter Alexander, managing director of Z-Ben Advisors, a consultancy that advises foreign asset managers in China, said he was optimistic JPMorgan could buy the shares and receive regulatory approval for control relatively quickly. But he cautioned that this was not guaranteed.

“While it looks as though it’s a pretty straightforward process, it’s still a public auction and this is China, anything can happen,” he said.
He said that if a sale went through, other foreign asset managers seeking control of their JVs were also likely to get the green light — provided Beijing and Washington agreed on a trade deal.

“The only variable we believe has been holding this process up is the ongoing bilateral dispute between China and the Untied States,” Mr Alexander said. International fund managers have moved to expand their presence in China this year.

BlackRock’s chief executive last month said the company was “very engaged” with Chinese regulators on gaining majority control of a local asset manager, while Morgan Stanley bought an additional 5.5 per cent of its local fund management business via online marketplace Taobao, taking its stake to almost 43 per cent.

JPMorgan in January won approval from China’s securities regulator to sell two Hong Kong-based funds into the mainland.