China

Fidelity International submits China retail fund applications

Fidelity International (Fidelity), one of the world's leading investment & asset management companies, has reportedly applied for regulatory permission to establish a mutual funds operation in mainland China.

According to a Financial Times article, the asset management firm has submitted its application for a wholly foreign-owned enterprise mutual funds license to the China Securities Regulatory Commission.

The application by Fidelity comes close on the heels of China’s scrapping of the foreign ownership caps in April 2020, with the firm looking to build even more upon its current China offering, already boasting around 1,300 employees based in Shanghai, Dalian and Beijing.

Through the license, Fidelity hopes that it will be able to tap into the Chinese mutual fund market, with aspirations to be licensed to begin operations in 2021.

Rajeev Mittal, Managing Director, Asia Pacific ex-Japan, Fidelity International, said: “The application for a mutual fund license is an important milestone in our China strategy.”

Fidelity has been operating in the country for over two decades, having been the first foreign asset management firm to have been approved to receive a wholly foreign-owned enterprise private fund management qualification, a license it has held for over 3 years; this gives the firm permission to sell a limited number of Chinese HNWIs and institution entities investment products.

The mutual fund license would allow Fidelity to expand its reach to China’s individual investors, a market coveted by the firm, which, according to Daisy Ho, President, China, Fidelity International, will “continue to devote resources to expand our capabilities and develop more solutions,” as reported in a Reuters article.

Fidelity will face competition in the form of firms such as Neuberger Berman and BlackRock, which have already similarly applied for regulatory approval, and Schroders, which reportedly plans to apply in the future, as stated by the Shanghai government.

Lyndon Chao, Managing Director, Asia Securities Industry & Financial Markets Association, said: “More and more countries are imposing restrictions on investment, but China has been going in the opposite direction,” commenting on the country’s laxing of restrictions placed on foreign asset management firms.

“As long as China’s market remains open ... you’re going to see more and more foreign investment into China. It’s natural,” added Chao.

Other firms have entered the market through strategic mergers or joint ventures, such as the business established through the partnership between Vanguard and Ant Financial; the joint venture recently unveiled a robo-advisory solution named ‘Bang Ni Tou’, aimed at Ant Financial’s 900 million-strong customer base.

Similarly, JPMorgan recently purchased the remaining shares of its minority partner China International Fund Management for USD1 billion, buying out Shanghai International Trust, its local partner’s minority holding in the business.