By Samuel Shen and Selena Li
SHANGHAI/HONG KONG (Reuters) – Warburg Pincus has received Chinese regulatory approval to buy a 23.3% stake in Zhong Ou Asset Management Co, as the U.S. private equity giant expands its foothold in China’s $3.8 trillion mutual fund market.
Warburg Pincus said in a statement that once completed the purchase will make it the biggest institutional shareholder in Zhou Ou. The firm is buying the stake from Italy’s Intesa Sanpaolo Bank.
“Zhong Ou AMC has built up a strong business over the years through its outstanding investment and research capabilities, market-based operation, and strong distribution channels,” Ben Zhou, managing director at Warburg Pincus, said in the statement.
Warburg Pincus has over 57 years of experience in the global asset management industry and can assist Zhong Ou AMC in its future development, Zhou said.
The stake Warburg Pincus is buying accounts for a 23.3% equity stake in Zhong Ou, representing registered capital of 51.26 million yuan ($7.48 million), the China Securities Regulatory Commission (CSRC) said in a statement announcing the approval. Warburg Pincus declined to disclose the transaction value.
Zhong Ou had 350.8 billion yuan worth of assets in its public funds as of September, excluding money market products, data from its website shows.
The acquisition is a boost to the firm’s presence in China’s mutual fund market, adding on to its existing 29% ownership in Hwabao WP Fund Management, another fund company in which Warburg Pincus invested in 2017.
The acquisition comes as the CSRC is speeding up application approvals for foreign financial institutions seeking to increase their investments in local units.
Morgan Stanley, JPMorgan and Manulife Financial Corp were allowed by the regulator in recent months to obtain full ownership of their Chinese mutual fund ventures.
China has 155 licenced fund houses which run retail fund products, with fewer than 10 of them fully owned by foreign firms since a ownership restriction was removed in 2019.
($1 = 6.8533 Chinese yuan renminbi)
(This story has been corrected to say 51.26 million yuan is the registered capital, not transaction value, in paragraph 5)
(Reporting by Samuel Sheng in Shanghai and Selena Li in Hong Kong; Editing by MarkPotter and Sharon Singleton)