Despite challenging market conditions, global asset managers are reaching an inflection point in China as eight firms have either established wholly foreign-owned fund management companies (FMCs), or secured final approval to take full control of their Chinese mutual fund JVs at the point of writing. This development underpins the pivotal role FMCs play in the broader Chinese wealth and asset management industry.

JP Morgan Asset Management capitalized on the complete takeover of its Chinese fund JV, resulting in better scores across multiple fronts and instantly doubling the US manager’s domestic assets under management (AUM) in China. Its move provides a comprehensive asset management business, including mutual funds, segregated accounts, QDII, and QDLP, as well as a recognized brand and an extensive distribution network.

Consequently, JP Morgan Asset Management now shares the leading position in Broadridge’s latest China Power ranking with BlackRock, which established the first wholly foreign-owned FMC in China. While BlackRock’s score is slightly lower due to a decline in its inbound Chinese AUM, UBS Global Asset Management maintained third place with a moderate decline in its overall score. Notably, UBS’s potential moves in China following the acquisition of Credit Suisse, including addressing two fund JVs and potentially establishing a new FMC, could strengthen its presence in the Chinese market going forward.

Other global managers pursuing FMC strategies have also made significant progress, with some experiencing significant gains in scores and rankings. Schroders, as one of only two global managers (along with BlackRock) securing both a wholly foreign-owned FMC and a majority-controlled bank wealth management JV, surpassed Invesco to take the fourth spot in the China Power Ranking. Fidelity maintained its ranking while improving its scores, particularly in branding and local operational strength, benefiting from the launch of its first retail fund in April this year.

Manulife Investment Management and Morgan Stanley Investment Management jumped six and nine spots, respectively, entering the top 10 for the first time. Like JP Morgan AM, their full control of their fund JVs led to increased scores across most ranking categories. Both firms have benefited from their mutual fund, segregated account, and other related businesses, with Manulife’s China FMC gaining additional QDII quota and Morgan Stanley’s Chinese unit receiving a new QDII license approval earlier this year.

With China projected to account for 24% of global organic growth (net new flows) over the next decade, up from 9% in the previous ten-year span, China will be a pivotal play for any global manager with ambitions to stay within the Top 50 asset managers. Ninety-four percent of the Top 50 managers manage China assets, of which more than half have a domestic presence. Growth models for global managers in China range from an All-access model to a Remote approach. The strategy chosen is hugely contingent on one’s definition of success: be it asset growth, revenue/profit maximization, or business diversification. If market share is the key success metric, the importance of an FMC license is demonstrated by the three models (All Access, FMC-led, Leverage), as together they control more than 75% of China assets. However, if short term results are more critical or risk tolerance is lower, Remote and Specialist models are strong options, with firms demonstrating strong growth even without a full-fledged onshore presence.

Ultimately, the best strategies are built on strong fundamentals with clearly defined goals and a dynamic process that encourages ongoing innovation and optimization. Three principles to define your competitive strategy:

1. Know where to where to build, where to partner, and where to pass
2. Have a clear set of metrics to establish triggers for resource support and withdrawal
3. Establish a data-driven process for product innovation and distribution, ensuring effective communication and learning between global and local office