Competition from private funds, brokerages and e-commerce firms will create a "war for talent" in China's asset management industry, warns a consultancy.
The battle will be desperate because Chinese firms must shift their attention to active management as yields fall on money market funds – and active management requires skill.
"With more capital expected to enter the capital markets from both domestic and offshore sources, fund management companies in China will certainly have to build up their management expertise to deal with potential demand," says Yoon Ng, Cerulli's Asia research director.
"Add private funds and brokerages to the fray, and one will get a sense of just how challenging the environment will be when too many firms chase a limited amount of talent."
A complicating factor in the Chinese market is the rise of e-commerce firms as challengers to fund management firms. Ant Financial Services, an affiliate of Alibaba that was formerly Alipay, now runs the largest money market fund in China. Ant Financial Services is reportedly planning to buy a stake in Tebon Fund Management.
Cerulli Associates says the creation of self-contained business units within fund management companies, in which star managers are given the power to hire staff and share profits, could help retain top employees.
Small fund managers such as China Post & Capital and Zhong Ou Asset Management have implemented such schemes in an attempt to keep their best minds within the firm, says Felix Ng, associate director with Cerulli.
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