Global Trustee and Fiduciary Services News and Views Issue 50

Global Trustee and Fiduciary Services News & Views | Issue 50 | 2018 93 The key issue, therefore, is what type of business a global fund manager wants to establish, what the manager’s objectives are, who the target clients are and whether the manager wishes to manage money locally. The chart below gives a more detailed outline of the various WFOE business types that can be established by global fund managers. 1 2 3 4 5 6 WFOE WFOE WFOE WFOE WFOE JV Consulting, general business advisory Trading company Investment advisory QDLP manager PFM Asset manager Business scope General business advisory allowed. This type of WFOE may not advise offshore clients on financial products, including securities investment. Used most often by offshore companies who want to trade local commodities. Can advise offshore parent company on financial/ investment related matters. Not supposed to advise QFII clients as securities related investment advisory requires special licence. Special licence to manage a local private fund linking to offshore fund. Receives quota to invest offshore. A local Shanghai municipality special licence. Need to have (3) first before applying for PFM licence from AMAC. Can raise local funds to invest into local securities. Cannot invest into offshore market (QDII and Stock Connect — window guidance) for now. General asset management (segregated account, mutual fund, including mutual recognition scheme, QDII/RQDII, subsidiary business, qualified manager can apply for qualification to manage funds for NCSSF, corporate annuity, etc.). Regulator State Administration for Industry and Commerce (SAIC), SAFE  SAIC, SAFE. CSRC (if trading commodities) SAIC, SAFE  SAIC, SAFE, AMAC, SFO SAIC, SAFE, AMAC SAIC, SAFE, CSRC Example Citadel, Oak Tree, Man Group, Och-Ziff, Canyon, Winton, UBS ANM, DB AM, Nomura AM, EJF, Guangfa- Persistent, JPM AM, Blackrock, Value Partners Invesco, UBS AM, Neuburger Berman, FIL, Aberdeen, MAN Group, Fullerton, Value Partners, BlackRock, Schroders JPM Asset Management, HFT, Invesco Greatwall, SPDB-AXA, ICBC CS, BoComm Schroders Setup cost Lower capital requirement, around RMB1m is sufficient. Lower capital requirement, around RMB1m is sufficient. Difficult to get business registration licence now. May need to acquire an existing firm. Lower capital requirement, around RMB1m is sufficient. Minimum USD2m capital requirement, 5 onshore employees. From 2013-2015, SFO awarded USD1.3bn quota to 16 managers in 3 batches. The scheme has resumed since early 2018, and granted licences to about a dozen managers. Need to launch local private fund within 6 months after licence approval. Some existing WFOE PMFs spent USD2m and hired at least 5 onshore employees. Total 46 JVs in China. Foreign managers now can increase their stake to 51% from previous max of 49%. • At the end of 2016, the Chinese asset management industry stood at total AuM size of RMB116 trillion (USD17.5 trillion), up from RMB95 trillion the year before, a 22% YOY growth. • By 2019, China could become the second-largest asset management market, next to the US. • By 2020, total AuMs in China’s asset management industry is estimated to reach RMB174 trillion (USD27 trillion). • By 2030, overseas asset management institutions are estimated to take 6% market share of China’s asset management market in terms of AuMs. • Following the 2016 China-US Strategic & Economic Dialogue, AMAC opened PFM registration to WFOE. • On November 2017, the Chinese government announced plans to allow foreign businesses to own as much as 51% of shares directly or indirectly in a joint venture in securities, funds and futures industries, and insurance companies. The 51% ownership cap will eventually be phased out after three years for securities, funds and futures industries, and five years for insurance companies conducting life insurance business. Source: Casey Quirk Deloitte, AMAC and industry news.