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US asset managers dart into China's vast market

J.P. Morgan eyes joint venture control; Vanguard logs customer assets surge

An investor sits in front of a board showing stock information at a brokerage office in Beijing in December 2018.   © Reuters

NEW YORK -- Asset management behemoths in the U.S. are ratcheting up their operations in China, seeing golden opportunities in the immense market amid the diminishing vigor of North America.

These investment companies are unfazed by the trade and security row between Beijing and Washington, responding to China's call for Western financial groups to bring their product know-how to the world's second-largest economy.

J.P. Morgan Asset Management is poised to become the first foreign company to own a majority stake in a Chinese mutual funds company, while T. Rowe Price is catching up with peers in bolstering its sales structure there.

J.P. Morgan Asset Management, which previously held a 49% interest in joint venture China International Fund Management, acquired an additional 2% of that entity's outstanding shares, the U.S. company said last month. Upon approval of American and Chinese authorities, it will make history as the first foreign player with 51% ownership of a Chinese mutual funds company.

"We are pleased to have reached this important milestone," said Dan Watkins, CEO for Asia-Pacific.

Beijing reversed its ban on foreign asset managers from selling mutual funds to local individuals when it loosened the rule in 2017 to allow for up to 51% ownership in a joint venture. But no player has reached that threshold so far, with BlackRock and other U.S. and European giants holding 49% or smaller stakes in their joint ventures with mainland financial groups.

Asset managers see a golden opportunity in China's vast market. Invesco's assets under management in China quadrupled over just one year after the U.S. company began offering mutual funds to the more than 500 million customers of business partner and Alibaba affiliate Ant Financial Services' Alipay payment platform who parked their surplus funds in money market funds managed by Ant Financial.

Latecomers from the U.S. are following J.P. Morgan Asset Management's lead. Vanguard has set up a joint venture with Ant Financial. T. Rowe Price, which does not have a joint venture in China, has created a sales manager position for overseeing greater China, responsible for strengthening the firm's relationship with local financial institutions to have its products marketed to affluent customers.

The trade conflict is not a concern for these asset managers at this point. China wants the expertise of leading firms in the U.S. and Europe, T. Rowe Price CEO Bill Stromberg said.

The push by U.S. groups comes at a time when their home market is slowing down.

The balance of assets under management shrank 4% on the year to $74.3 trillion globally, with North America suffering a 5% slide, according to Boston Consulting Group. A bright spot is China, which the consulting company predicts will surpass Europe to become the world's second-largest region for asset management in the next decade.

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