The biggest fund manager will be Chinese in 10 years’ time, according to the chief executive of State Street Global Advisors, which manages $2.9tn of assets globally.

Cyrus Taraporevala said the expected huge growth of the Chinese mutual fund industry, combined with the potential for Chinese companies to buy western managers, would lead to profound disruption in the sector.

“I predict that China’s full emergence into the global capital markets and the rise of Chinese mega asset managers is going to be the biggest regional shift in the history of asset management,” he said. “Time, scale and momentum are on China’s side.”

He added that assets under management in China had quadrupled since 2013to $1.7tn and were growing at 17 per cent per year. But there was much greater potential for further growth as only 8 per cent of personal financial assets were in funds, and regulators were trying to orchestrate a reallocation of capital from the country’s shadow banking sector into investment funds.

China has emerged as a key battleground for foreign asset managers trying to expand globally and take advantage of the demographic shifts in the world’s most populous country.

Mr Taraporevala, who has led the third biggest investment group by assets since November 2017, said digital disruption was also a threat to traditional fund managers. “I would not underestimate the ability of China’s fintech companies to leapfrog their western competitors,” he said.

“Companies like Ant Financial and Tencent are going to move increasingly from money market funds and deposit products into the very heart of asset management. Ant Financial’s money market fund became the world’s largest money market fund in four years. Think about that.”

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SSGA received approval from the Chinese regulator in December to set up an onshore investment management wholly foreign-owned enterprise structure. It has since recruited Alex Sun from HSBC’s Jintrust Fund Management to the new role of head of China and Charles Zhao from Janus Henderson as head of institutions within the country.

Jennifer Johnson, president and chief operating officer at Franklin Templeton, which manages $690bn, said China’s economy would far outweigh the US’s in a decade.

“I don’t know if the largest asset manager is going to be Chinese then, but it will be one that has worked out how to do business in China,” she added. “I don’t think you can be a large asset manager if you do not have a presence in China.”

This week the Wall Street Journal reported that BlackRock, the world’s biggest fund manager, had held talks with Tencent, the Chinese internet behemoth, about working together to produce tools for the Chinese market.

Robert Kapito, a co-founder of BlackRock, warned last year that large Asian tech companies posed a disruptive threat to traditional fund managers.

Via Financial Times