- Six FMCs reported net profits of more than RMB1 billion in 2015
- For the largest 20 managers in China, the average net profit margin was 30.4% in 2015
- Institutional investors are estimated to have contributed one-third of assets under management as at end-2015
Despite the downturn in China markets in the second half of 2015, Chinese fund management companies (FMCs) saw revenues and profits rising in 2015. Many FMCs saw double-digit and even triple-digit net profit growth during the year.
This is one of the key findings of a research initiative by Cerulli Associates entitled Asset Management in China 2016. This research initiative is divided into three parts: two quarterly strategic overview reports followed by our annual report scheduled for release in the third quarter of 2016. This key finding was presented in the second strategic overview, released this month.
Cerulli's research shows that six FMCs reported net profits of more than RMB1 billion in 2015. China Asset Management was the most profitable with RMB1.41 billion in net profit, followed by ICBC Credit Suisse Asset Management with a net profit of RMB1.29 billion for 2015.
For the largest 20 managers in China, the average net profit margin was 30.4% in 2015 while the net profit yield--which measures how much managers earn in basis points for each renminbi they manage--was approximately 28.5 basis points. Fullgoal Fund Management showed the best net profit yield last year at 56.9 basis points.
Institutions continue to play a big part in growing FMCs revenues and profits. "Institutional investors are estimated to have contributed one-third of assets under management as at end-2015. We understand that they prefer one to-one segregated accounts because such accounts are more flexible in active management and in using leverage," says Miao Hui, senior analyst with Cerulli who leads the China research initiative.
Institutional investors also welcome "customized mutual funds," or funds launched for specific investors that meet the minimum number of subscribers, with lower leverage allowed. Still, it will be hard for FMCs to sustain 2015's profit levels in 2016. "While institutional investors' participation in capital markets is expected to grow in 2016, FMCs' profits will be hard to maintain under current volatile market conditions," Hui adds.