Mon, Jan 7, 201316 securities firms and 14 insurance companies meet the criteria of issuing public funds
The CSRC has released a consultation draft to allow securities firms, insurance companies and private equity firms to issue public fund products. Previously, securities firms and insurance companies’ asset management business belong to the private equity category. As at the end of Nov 2012, the asset under management (AUM) scale of securities firms has more than doubled to RMB 1.2 tn compared to the beginning of 2012. AUM of insurance companies has also gradually grown to RMB 7 tn. On contrast, AUM of public funds maintained flat at RMB 2.6 tn, registering past 5-year (2008-2012) CAGR of only 4.26%.
According to the draft, the securities, insurance asset management companies and private equity fund management institutions, which meet the criteria such as more than 3 years of experience in asset management, three consecutive years of positive net profit and etc., are likely to be allowed to operate the public fund management business.
In addition, securities firms must also meet the criteria of AUM not less than RMB 20 bn, net capital not less than RMB 1 bn and regulatory rating above B. Insurance firms must meet the criteria of AUM not less than RMB 20 bn. Private equity companies must meet the criteria of committed capital not less than RMB 10 mn and AUM not less than RMB 3 bn for the past three years. 16 securities firms and 14 insurance companies meet above criteria.
Our analysis: Securities firms and insurance companies have accumulated redundant experience in asset management industry. There are not many difficulties involved in operating public asset management business for them. The only one may be the sales of their public funds since public funds’ target customer base greatly enlarges. The permission of issuing public funds by securities firms, insurance companies and private equities will further intensify the competition on investment performance, fees, etc., among different asset management institutions, as they have to fully disclose the funds information and customers could have more choices when managing their wealth.