Asiamoney China's Best Wealth Managers 2018
The country’s wealth management industry is slowly but surely moving from growing pains to growing opportunities. Asiamoney profiles the leaders in an increasingly competitive field.
Wealth management firm of the year: CreditEase
Among China’s young, independent, management firms, CreditEase has not only maintained robust business growth thanks to its investment and service capabilities, but also demonstrated leadership on multiple fronts, including fintech application, investor education and regulatory compliance in domestic wealth management.
|Lin Hou, CreditEase
CreditEase’s business growth continues to impress its domestic peers. As of March 2018, its assets under management topped Rmb140 billion ($22 billion), a jump of 40% from the end of 2016. At the same time, the number of its ultra-high net-worth clients – those with AuM of Rmb10 million or more – surged 85% from a year earlier.
A primary driver of that growth is CreditEase’s ability to generate stable and attractive returns from investments both inside and outside China, and across asset classes. Overseas and fund of funds (FoFs) assets each account for more than 20% of total assets, while equities account for 40%.
In 2017, its FoFs achieved investment returns well above the market average. As of March this year, the firm had cumulative revenues from fixed income products of more than Rmb200 billion from its clients. Nearly all of the products had realized expect gains, with no single case of loss in principal and only a tiny proportion showing neither gain or loss.
While expanding its service range through traditional channels, CreditEase continues to lead its domestic peers in deploying fintech to optimize investment processes and enable customized asset allocation for customers.
Last year, it launched an artificial intelligence platform to improve the efficiency of early-stage vetting and screening for its private equity investments. It has also applied big data analysis in client segmentation to enable better and more comprehensive understanding of client profiles and needs.
CreditEase has also been a leader in investor education. It has not only organized education programmes for high net-worth clients, but also created educational content on wealth management for school children in dozens of Chinese cities.
Since 2016, it has published an annual white paper on global asset allocation for Chinese investors.
On top of that, CreditEase has played a key role in establishing an industry body, the China Internet Finance Association, to standardize online wealth management practices and promote regulatory compliance. It’s head of wealth management is Lin Hou.
Best independent wealth manager for high net-worth individuals: Noah
New York-listed Noah Holdings has won more high net-worth clients than its domestic peers. It continues to expand its customer base at a rapid pace, supported by its extensive business network and strong service capabilities.
The number of Noah’s registered clients has risen substantially in the last three years. At the end of 2017, Noah had registered 186,918 HNW clients, each entrusting assets worth Rmb10 million ($1.6 million) or more to the firm’s management, up 38% from a year earlier and nearly double the figure of two years ago.
Noah has also attracted far more ultra-high net-worth clients than its domestic peers. By the end of 2017, it had more than 100 family office-level clients, each with AuM of at least $500 million, and more than 700 so-called ‘black card’ clients – each with AuM of more than Rmb500 million.
Noah has an extensive business network among domestic independent wealth managers and continues to expand its network’s geographical coverage in China to make its services easily available to more HNW clients, especially those in inland regions.
At the end of 2017, its network consisted of 237 offices in 79 domestic cities, up from 185 offices in 71 cities a year earlier. With headquarters in Shanghai, it has also established 11 regional centres across China to strengthen the management of its domestic operations.
Last year, it also opened new offices in the US, Canada and Australia to expand its overseas business network.
Noah has been granted licences by regulatory authorities in and outside China for a wide range of businesses, including family offices, trust, education, insurance brokerage, mortgages and car leasing.
The firm had 1,335 dedicated relationship managers to serve HNW clients at the end of 2017, up from 1,169 a year earlier. All this has meant that Noah is well-placed to serve HNW customers.
Best wealth manager for funds of funds: CreditEase
CreditEase has led domestic wealth management firms in the roll out of fund of funds products across a wide range of asset classes, from private equity and public equity to real estate. Its FoF products stand out thanks to their record of delivering steady returns for investors.
CreditEase is one of the first Chinese financial institutions to invest in alternative assets via FoFs. Its private equity FoFs have recorded robust growth, with assets under management exceeding Rmb20 billion ($3.1 billion) by the end of 2017. Through private equity FoFs, the firm has invested in more than 200 industry-leading funds inside and outside China, covering high-growth sectors including TMT, consumer, advanced manufacturing, healthcare, energy conservation and environmental protection.
Thanks to diversified asset allocation, up to 90% of the firm’s private equity FoF products started cash distribution in the first year after inception. By contrast, the average time span between fund inception and the first distribution in the Chinese private equity industry is between 2.5 to 3 years.
In 2017, CreditEase’s public equity FoF products – which invest in publicly traded securities – also showed impressive results. Up to 90% of its public equity FoFs generated positive yields, versus 61% among private funds investing in public equities in the broader market.
CreditEase’s real estate FoFs fall under the opportunistic, income and debt categories and invest in offices, residential buildings, retail and hotel properties in the US, Europe and Asia Pacific. Such a cross-region and multi-pronged asset allocation approach diversifies risks from economic or political turbulence in a single region or from the underperformance of a single project. This ensures steady AuM growth and outperformance of its real estate FoFs.
By the end of 2017, the AuM of CreditEase’s real estate FoFs and funds reached Rmb12.5 billion. The internal rate of return of the firm’s opportunistic real estate FoF series ranges from 15% to 18%, while that of its income real estate FoF series ranges from 7.7% to 11.8%.
Best wealth manager for overseas asset management: Noah
Noah has led domestic wealth management firms in terms of global expansion to serve high net-worth overseas Chinese clients. It has made remarkable progress on that front, under co-founder and chief executive Jingbo Wang.
Last year, it opened an office in New York so it could look for asset allocation opportunities in the local market. It has also opened offices in Melbourne and Vancouver. To date, the firm has built up an extensive business network overseas with additional offices in Hong Kong, Taipei, Silicon Valley and Jersey in the Channel Islands.
It has received licences from local regulatory authorities to provide a broad range of services outside China. They include licences to deal in securities, advisory services for securities, asset management, insurance brokerage, family trusts, and money lending in Hong Kong; registered investment advisor (RIA) and insurance brokerage licences in the US; and a family trust licence in Jersey in the Channel Islands.
Noah has also formed a global task force to manage overseas assets. The firm’s core management team is made up of veteran asset managers recruited from global consultancies and banks including McKinsey, Temasek, Morgan Stanley, Merrill Lynch, ABN Amro and UBS.
Thanks to its expanding service network and strong expertise, Noah has achieved sustainable and robust growth for its overseas asset management business.
The annual compound growth rate of Noah’s overseas assets under management in the last four years reached 77%. By the end of 2017, the firm’s overseas AuM reached $3.3 billion and accounted for 20% of its total AuM.
Best trust firm for wealth management services: AVIC TRUST
Avic Trust is not the largest trust firm in China, but it has led the transformation of the domestic industry from mere distributors of investment products for infrastructure and real estate projects to wealth managers. Because of its strong capability in developing family trust products, the firm is poised to join the ranks of the top-tier trust firms in China.
Avic Trust is majority owned by Avic Capital Co., the investment arm of state-owned Aviation Industry Corporation of China. Its business transformation started in 2009 when it positioned itself as an integrated wealth manager service provider. In 2014, Avic Trust became one of the first trust firms to set up a private banking unit to accelerate the development of family trust products.
The firm has developed a proprietary IT system to support its family trust business. Coming online at the end of 2016, the system has not only standardized processes and improved the efficiency of its family trust business, but also introduced better protection of its customer data.
Avic Trust started to offer one-stop comprehensive, customized services in 2017 for family trust clients under its ‘One Trust’ concept by forming partnerships with domestic banks, securities firms, independent wealth management firms, as well as domestic and foreign law and tax advisory firms.
It efforts have paid off nicely. By the end of 2017, Avic Trust had more than 10,000 high and ultra-high net-worth clients. At the same time, the number of family trust clients topped 600, tripling the tally from a year earlier. The total assets under management of its family trust business also exceeded Rmb10 billion ($1.6 billion).
Avic Trust has become a leading family trust product provider in China. The firm continues to expand the range of its family trust product offerings to meet the diverse and changing wealth management needs of ultra-high net-worth families in China. That bodes well for the sustainable growth of its wealth management business.
Best securities house for wealth management services: Founder Securities
Wealth management is a fairly new business for Chinese securities firms. The Securities Association of China ranked Founder Securities as the 13th largest domestic securities firm by assets for 2016, the latest ranking available. But the Shanghai-listed firm is ahead of other domestic securities firms in establishing a fully fitted unit and adopting international practices to enable the growth of the wealth management business.
Founder Securities is one of the first securities firms to create a business unit dedicated to managing the wealth of clients. The unit, formed under the firm’s brokerage service division, is made up of operation, training, investment advisory and private banking centres.
Through close collaboration with the firm’s asset management, fixed income, investment banking, institutional services and research divisions, the wealth management unit is mandated to seek premium asset allocation opportunities inside and outside China for high net-worth clients.
When serving clients, Founder Securities’ wealth management team has embraced the internationally adopted ‘1+1+N’ service model, whereby each client is served by a professional relationship manager, and each relationship manager works closely with a highly specialized team to develop professional solutions to address customer needs.
In December 2017, Founder Securities became the first Chinese securities firm to launch family trust products to strengthen its capability in serving ultra-high net-worth customers.
As the Chinese stock market has underperformed in recent years, wealth management has become an increasingly important source of revenue for Founder Securities. In 2017, thanks to the revenue contribution from its fast-growing wealth management business, the total revenue generated by the firm’s investment advisory services exceeded Rmb130 million ($20.3 million).