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- Brand perception is one of the key success factors for selling funds in China. Although Sino-foreign joint ventures (JVs) generally enjoy good brand recognition, thanks greatly to the influence and relevance of their respective Chinese parents, JV firms have a long way to go to catch up with top pure play Chinese fund managers.
The top three Sino-foreign JV fund brands in Broadridge’s China Retail Brand Ranking, an important component of its recently released China Power Ranking, are ICBC Credit Suisse Asset Management, CCB Principal Asset Management, and Harvest Fund Management. Close to 30 medium- and large-sized domestic fund managers are rated based on Broadridge’s bi-annual retail investor survey, in which 3,000 Chinese investors across four “Tier 1” cities--Beijing, Shanghai, Guangzhou and Shenzhen--gender, age, and wealth groups, were asked to rank their top 3 mutual fund brands.
Sino-foreign JV fund firms generally enjoy good brand recognition among Chinese retail investors, as they occupy eight spots in the top-15 list for brand recognition, albeit they trend towards the bottom half of the table. In fact, the JV brands tend to reflect the influence and relevance of their respective Chinese parents, and those with a Chinese bank parent are usually ranked high. For instance, ICBC Credit Suisse is the fund JV between China’s largest bank, Industrial and Commercial Bank of China, and Swiss wealth management giant Credit Suisse, while CCB Principal is jointly owned by China Construction Bank, one of the "Big Four" banks in China and U.S.-based Principal Financial.
Among the fund managers on the top-15 list, China International Fund Management (CIFM) stands out as a JV that has benefited more from its foreign than local parent, namely JP Morgan, which is a highly regarded brand in China. JP Morgan is poised to become the first foreign firm be the major shareholder of a Chinese fund JV after winning a bid in August 2019 to increase its stake in CIFM to 51%. With the China Securities Regulatory Commission (CSRC) recently announcing that it would fully lift the foreign ownership limit for fund management firms starting from 1 April 2020, more global firms are expected to take a majority stake in their Chinese JVs or even establish 100%-owned retail fund businesses in China.
Long way for JV firms to go
Meanwhile, JV firms still have a long way to go to catch up with top domestic fund companies, as five out of the top six mutual fund brands are pure play Chinese managers, with Tianhong leading the way, thanks to the enormous popularity of its Yu’E Bao fund. The only exception is China Asset Management but it is hardly considered a Sino-foreign JV in China, as the firm’s foreign parents play a minor role as financial investors.
The bi-annual survey also reveals in detail the preferences of Chinese retail investors for fund and other financial products, investment allocation, investment decision-making, purchasing channels, as well as fund company brands and other factors. For instance, Chinese investors, similar to their counterparts in other emerging markets, are well characterized by their performance-chasing related behaviours. However, the popularity and scale of a fund company, which can greatly contribute to brand perception, are ranked consistently high among retail investors surveyed, reflecting the importance of branding in selling mutual funds in China.
Among other findings from the survey, foreign ownership is considered positive in brand perception by retail investors in China, which can bring some moderate advantages to JVs. Further, the survey revealed the prevalent use of mobile apps across gender, age, location and wealth tier when purchasing funds, the investment preference for high-tech as well as medical and health services sectors, and the Asia bias when investing overseas, with a particular focus on Hong Kong. Strong brand recognition and longer-term local commitments, coupled with the right product and distribution strategies, have been the key for global asset managers to build a successful business in China, particularly against the backdrop of Chinese financial markets continuing to open up to foreign firms.
