China's trust companies have for the first time overtaken retail funds in terms of assets under management (AUM), finds a recent KPMG report.
KPMG's inaugural survey on the trust sector, titled China Mainland Trust Survey 2011, contains the summary financials for 56 of the 65 registered trust companies in China, and notes that 2010 was the best year for trust companies since their relicensing in 2007.
Trusts experienced unprecedented growth rates in profits, while AUM for some companies doubled, and in other cases, tripled from 2009 to 2010. Retail fund management companies generated assets under management (AUM) totaling USD 400bn for 2010, whereas China's trust funds saw AUM totaling USD 480bn for the same time period.
Jason Bedford, Manager, Financial Services, KPMG China, and author of the report, said: "Trust companies are one of the key driving forces behind financial innovation in China. They have a unique role, as a driver of wealth management services as well as providing much needed debt, equity and hybrid financing in China."
"Their unprecedented success in the last 12 months is because they are targeting an attractive and prosperous segment of the market - high net-worth individuals and institutional investors. They are also more effectively tapping into China's growing domestic personal wealth as the economy continues to boom."
Trust companies are unique among Chinese financial institutions and in particular their fund management capabilities allow them access to the widest range of asset classes of any other financial institution. One of the more noticeable trends in the last 16 months has been the increasing diversity of their product offerings which now include arbitrage funds, sunshine funds (privately managed equity funds), infrastructure funds and real estate funds to name a few.
Simon Gleave, Regional Head, Financial Services, KPMG China, said: "Trust companies play a valuable role in China's financial sector. The level of sophistication and risk management for trust products has seen a tremendous increase. This is being driven by increased professionalism in the sector and effective regulatory oversight. Ongoing challenges however include ensuring high levels of risk management while also making sure that staff skill sets match the ever-changing needs of the business."
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KPMG China has 13 offices (including KPMG Advisory (China) Limited) in Beijing, Shanghai, Shenyang, Nanjing, Hangzhou, Fuzhou, Xiamen, Qingdao, Guangzhou, Shenzhen, Chengdu, Hong Kong and Macau, with around 9,000 professionals.