(Yicai Global) Dec. 1 -- At the two-day 2022 Shanghai Global Asset Management Forum jointly hosted by Yicai Media Group and Bank of China that closed yesterday, new trends in the country’s asset management business were discussed, including pension financing, green financing, and new opportunities in wealth management.
People’s wealth management needs are changing, especially for high-net-worth groups, and there are issues to deal with such as inheritance and composition-based arrangements of their wealth, said Wang Ya, general manager of BOC’s private banking center.
More young people are entering the market, Wang noted, and there is a big difference in the educational background and life experience of people from different generations, which creates challenges for wealth management agencies.
The recent fluctuations in the bond market drew a lot of attention. The net value of wealth management products with fixed income including banks’ wealth management products has fluctuated, which has also proved a challenge for wealth managers, said Ding Jieneng, chief investment officer of the fixed income division at Guotai Junan Securities Asset Management.
“Wealth management products with fixed income are the largest wealth management market apart from bank deposits, and there is a huge demand for these products,” Ding said. “It’s vital for wealth management agencies to do a good job in managing clients’ demands.”
China’s asset management market was worth CNY104 trillion (USD14.7 trillion) in 2016 and surged to CNY132 trillion last year, making the country the world’s second-largest asset management market after the United States.
Pension financing will create crucial opportunities for the asset management industry. Greater efforts must be made regarding the design, investment operations, and risk management of pension financing products, according to the characteristics of the pension and the different demands of clients of different ages and risk preferences, said Liu Donghai, chair of BOC Wealth Management.
The fund industry’s move into the pension sector dates back to the investment management of the social security fund in 2011, said Lou Yan, deputy general manager of China Universal Asset Management, adding that public funds gathered up in the national social security fund, basic old-age pension, and annuities have exceeded CNY4 trillion, making up more than half of the country’s total pension investment management scale.
Lou noted that the China Securities Regulatory Commission requires fund managers and sellers to form long-term assessment schemes lasting at least five years for the assessment of individual pension investment funds, and they must not have rankings for short-term yields.
Green Financial Practices
Green finance and investment will be among the important trends in the medium and long term, and financial institutions are currently exploring more green products.
Wang Shengming, president of CIB Wealth Management, said that there are many investment strategies for green investment, such as negative list management. Using the company’s data and external figures to find projects with high green investment content is conducive to avoiding risk, Wang noted.
Wang Yang, a founding partner of Primavera Capital, said that in the past five years, it has invested a total of about CNY10 billion (USD1.41 billion) in equity in different areas of the green economy.
For example, in October 2021, Primavera Capital poured more than USD600 million into two subsidiaries of Envision Technology Group, a green technology enterprise, which is currently the largest investment in the field of carbon neutrality.
This long-term strategic financing fund will be mainly used for the company’s globalization, technology research and development, and its wind power, energy storage, battery and other businesses.
New REIT Opportunities
Public real estate investment trusts have received greater attention from the asset management market in the past two years, opening a new channel for public funds to participate in alternative assets.
Tao Geng, president of Guotai Junan, said that since the CSRC and the National Development and Reform Commission jointly issued rules for REIT pilot schemes in April 2020, the business has developed greatly.
“It is expected that the number of REITs will reach 60 next year and 100 in about three years,” Tao said. “Even in the US, where REITs have developed for many years, the number of those listed is below 200, which shows that REIT development has been very fast in China.
“Among the 22 listed REIT projects, Guotai Junan worked on three orders, and we are optimistic about this industry,” Tao said.
Affordable rental housing REITs have been in the spotlight recently. In August, the first three pilot projects for public offering investment securities involving affordable rental housing were officially put on sale, with the underlying assets located in Shenzhen, Xiamen and Beijing.
They are in areas of high employment and ideal living facilities, offering stable tenant demand and a long-term occupancy rate of over 90 percent.
Zhou Guangyu, director of the Financial Development Department of Lingang District in Shanghai, said that infrastructure REITs can introduce equity funds and effectively reduce the current high debt risk for property developers.
Through infrastructure REITs, the efficiency of asset revitalization can improve and provide long-term and stable funds for real estate enterprises, which will help them come up with a sustainable development model.
Editor: Tom Litting