In April 2018, the regulator issued the Guidelines on Regulating the Asset Management Business of Financial Institutions, which requires the non-conforming institutions to make rectification within the transition period ended on December 30, 2020. In consideration of the pandemic and other factors, the regulator extended the transition period of the new asset management regulations to the end of 2021 in July 2020. The new new asset management regulations will be fully implemented from January 1, 2022. The new asset management regulations are a general term for a whole set of regulations for the asset management industry after April 27, 2018, which mainly covers financial products such as funds, banks, trusts, securities, futures and insurances. What development prospects will the asset management industry embrace under the new asset management supervision rules system?

1. Funds

During the three-year transition period, the market size of publicly offered funds have been continuously expanding. On November 30, 2021, the Asset Management Association of China released the data of publicly offered funds, showing that the size of publicly offered funds in China had reached RMB 25.32 trillion. As the new asset management regulations involve nesting of asset management products and leverage of privately offered investments, privately offered funds are facing a greater pressure of capital outflow in recent years. The implementation of new asset management regulations will reshape the development direction of privately offered funds and promote the differentiation and expansion of the privately offered fund industry. Fund companies may issue asset management products to raise funds under the premise of compliance with laws and regulations, and invest them in the sectors that meet the requirements of national strategies and the requirements of national supply-side structural reform policies. Cooperation with the financial subsidiaries of banks can also be considered to combine the active management ability of funds with the advantages of customer channels of banks.

2. Banks

The banking industry has seen an increasing number of wealth management subsidiaries of banks in recent years. Meanwhile, the banking industry is also going through a chaotic period of declining profits and downsizing. The small and medium-sized banks are faced with challenges in financial management, and it is imperative for them to weaken the transformation impact brought by the banking industry through reform, such as the establishment of external capital pool, abuse of amortized cost method and other capital improvement methods. In the future transformation of banks, their wealth management subsidiaries can issue privately or publicly offered funds and entrust these products to a professional fund team and pay a fixed management fee. Under such a business model, the financial subsidiaries of banks can maximize the customer advantage of the parent branch, and then generate the scale effect of financial management.

3. Trusts

Under the requirements of the new asset management regulations, the net value transformation of bank financial products is accelerated, which means that the trust channel business continues to be compressed and the non-standard investments are significantly reduced. A number of trust companies have deferred payment since 2021. While certain results in the transformation of the trust industry have been achieved, therefore, it’s necessary to follow the general trend of macroeconomic development.

In the short term, the trust industry should strengthen its awareness of risk prevention and give full play to its own characteristics through active transformation, such as exploring its own unique development path based on relatively flexible private placement characteristics. In the long run, the trust industry should strengthen its ability to optimize fund allocation, innovate and optimize the segmentation of trust products, and actively promote the development of service trust and public trust business.

4. Securities

For the securities industry, the central aim of the new asset management regulations is to eliminate as much room for regulatory arbitrage as possible. The channel service business in the asset management of securities companies is restricted, and the capital pool business of securities companies is explicitly prohibited, which affects the overall scale of the securities industry. Therefore, the asset management transformation of securities companies is accelerated during the transition period.

Securities can promote the industry transformation by establishing capital management companies, applying for the business qualification of publicly offered fund management and accelerating the asset securitization business.

5. Futures

Under the influence of the “de-channeling” environment, the development of asset management business of futures companies has been limited since the three-year transition period, and the overall business scale has decreased year-on-year. In light of the increasingly stringent overall regulation of the asset management industry, it is difficult to see significant development of futures asset management in a short period of time, and the traditional channel business can no longer meet the development and operation needs of futures companies. Therefore, futures companies have also started the active transformation of asset management business with a focus on aggregate asset management business supplemented by active management.

The futures asset management industry can start from strengthening the existing professional talent team as the transition point, actively work with external investment and financial institutions, and expand the segmentation varieties of futures products, and strive to seek industrial breakthroughs.

6. Insurance

Due to the unclear positioning of insurance asset management business, its investment scope still focuses on the use of funds, and various insurance products still tend to be homogeneous. In order to take the initiative in the market competition, insurance asset management institutions have also been trying to improve the comprehensive investment capacity since the transition period, for example, a shift from from extensive to intensive in insurance business, segmentation of insurance product categories and applicable groups.

In the future , insurance asset management institutions can try to broaden their own business scope, such as developing pension funds, testing the personal wealth market, and investing in the real economy through equity and claim investment plan, so as to provide long-term and stable funding support for China’s infrastructure projects.

Breaking the rule of rigid payment since the transition period has deprived the banks of their original financial advantages and brought them into a difficult transition period. And public;y offered funds will usher in large-scale development under this industry rule. Due to maturity mismatch in the trust industry, there have been many cases of payment failure of trust products upon maturity, which have led to numerous lawsuits, making it more difficult to raise funds in the future. Generally, fund institutions, bank financial management companies, trust institutions, securities companies, futures companies, insurance companies and other financial institutions are trying to seek the transformation opportunities under the new asset management regulations, actively adapt to the policy to speed up the transformation, and explore new development directions.