Manulife bids for full control of China fund JV, lured by $3.8 trln mkt-sources

Selena Li and Samuel Shen
·3 min read

By Selena Li and Samuel Shen

HONG KONG/SHANGHAI, June 29 (Reuters) - Canada's Manulife Financial Corp moved a step closer towards taking full control of its funds joint venture in China after regulators there accepted an application for the ownership change, two sources with knowledge of the matter told Reuters.

Manulife, Canada's largest life insurer, is seeking to bolster its presence in China's $3.8 trillion funds market. China's securities regulator officially accepted an application from Manulife's asset management arm recently to increase its stake in the joint venture to 100% from the current 49%, said the sources.

Manulife Investment Management, the insurer's global wealth and asset management arm, acquired the stake in Manulife Teda Fund Management in China in 2010 from ABN AMRO bank and teamed up with state-owned Tianjin TEDA International Holding, which owns the remaining 51% equity but is looking to sell it.

The Canadian insurer's move shows how foreign companies are positioning themselves in China as it opens up its financial services sector - from investment banking to insurance - worth trillions of dollars to international competition.

Since ownership caps for foreign companies in fund management JVs were scrapped in 2019, a growing number of foreign asset managers, including BlackRock and Fidelity, have set up operations in China to compete for a share of the country's swelling mutual funds market.

Assets under management in the industry, dominated by local fund managers, rose 27% in 2021 to $3.8 trillion. The number is forecast to more than double to $7.8 trillion by 2025, according to consultancy McKinsey.

Spokespersons at Manulife Investment Management and Manulife Teda Fund Management declined to comment.

Manulife Teda had around 60 billion yuan ($8.96 billion) in retail fund assets as of March this year.

The official acceptance of Manulife's application by the China Securities Regulatory Commission (CSRC) means the Canadian company is "a step closer" to taking full control of the venture and an approval could come soon, one of the sources said.

The timing of any forthcoming approval is not known yet, the source added.

A CSRC public disclosure made on May 22 shows it has decided on "whether or not to accept" an application from Manulife Teda to change more than 5% ownership. The disclosure, however, doesn't mention whether the CSRC has accepted the application.

The CSRC did not respond to a Reuters request for comment.

HIRING CEO

Besides the fund management joint venture in China, Manulife also has an insurance business in partnership with Sinochem in the world's second-largest economy. Manulife owns a 51% stake in the Chinese insurance joint venture.

Manulife's Asia CEO told Reuters earlier this month that the regional unit was on track to account for half of the Canadian insurer's core earnings by 2025 despite economic slowdowns and impact of COVID-19 on its key markets.

The change at Manulife's China fund venture got underway in July last year when Tianjin TEDA put its 51% stake on the block at a price of around $263 million, one of the sources said.

The venture is also in the process of hiring a new general manager to head its operations, according to the two sources. The firm is in the final stages of tapping the general manager of a rival foreign fund in China, the second source added.

JPMorgan became the first global bank that filed with the Chinese regulator last year to convert its local fund joint venture into a wholly owned business, which has yet to receive regulatory approval. ($1 = 6.6970 Chinese yuan renminbi) (Reporting by Selena Li in Hong Kong and Samuel Shen in Shanghai; Editing by Sumeet Chatterjee and Muralikumar Anantharaman)