AIG (AIG) , the world’s most valuable insurer, said on Thursday it had won initial approval to set up an asset management venture in China in a maiden foray into the country’s booming mutual funds sector.
AIG Global Investment Corp., an arm of American International Group (AIG), said it would own 33 percent of the 100 million yuan ($12.1 million) venture with China’s Huatai Securities, which will also have a one-third stake.
It follows foreign firms such as Dutch investment bank ING and France’s Societe Generale that operate ventures to sell mutual funds to the Chinese, who have $1.3 trillion in savings and are exploring alternatives to a rapidly crumbling cradle-to-grave welfare system.
Fund managers have said the business is lucrative, but markets have been weak. Stocks have fallen about 20 percent since April, when fears took hold that Beijing’s efforts to gently slow the economy would hurt corporate earnings.
Still, funds under management have ballooned to more than 200 billion yuan, from virtually zero about half a decade ago.
Teh-Hsiu Fu, the former head of greater China for the asset management arm of Switzerland’s UBS (UBS) , will be the chief executive of AIG-Huatai Fund Management Co. that will be based in Shanghai.
China’s Suzhou New District Hi-Tech Industrial Co., Jiangsu Communications Holding Co. and Guohua Energy Investment Corp. will also have stakes in the venture.
Last month, JP Morgan (JPM) said it had won initial approval to set up its first mutual funds venture, in which it would take a 33 percent stake.
AIG, with a market value of $183 billion, now owns licences to sell life insurance in eight Chinese cities. It is already the largest private equity investor in China with investment of $750 million, executives have said.
But the U.S. giant’s venture with Huatai, a mid-sized broker based in the eastern city of Nanjing, would be its first asset management company in the country.
It would take money from Chinese clients and invest in domestic securities on their behalf -- from stocks in the $500 billion equity markets to government bonds.
AIG plans to raise its stake in the venture to 49 percent -- with Beijing’s approval -- by the end of 2004, executives have said.