A report says China's asset management sector will be second only to that of the US soon and draw in half of the world's industry inflows. Several business models with thrive, but foreign firms may not find winning market share that easy.

China, the world’s second-largest economy, is also on track to be home to the world’s second-biggest asset management market, attracting half of the global industry’s new asset flows by 2019, a study predicts. By 2030, if trends continue, China will hold over $17 trillion in assets under management, rising from $2.8 trillion last year.

The predictions come from US-based asset management strategy consultancy Casey Quirk, a practice of Deloitte Consulting LLP.

Foreign firms will capture only 6 per cent of Chinese market share by 2030, largely limited by China's inclination toward domestic asset classes. As is the case in the US, local players will dominate the Chinese asset management market.

In its new whitepaper, Leadership in Times of Plenty: Future Winners in China's Asset Management Industry, the firm said Chinese growth rates should average 15 per cent per year through 2025, moderating to 12 per cent per year from 2025 to 2030.  In total, this will result in $8.5 trillion in new assets flowing into the industry from Chinese investors between 2017 and 2030.  

In other words, China will account for about the same amount of net new flows as all other global markets put together between today and 2030, the study said.

“In contrast to the rest of the world, China is the only large, multi-trillion dollar asset management market that has seen net new flows in excess of 30 percent on average for the past five years," Daniel Celeghin, a principal with Casey Quirk and head of its Asia-Pacific office, said.

"For local firms, this growth highlights the importance of aligning around a successful business model to capture future asset flows. And for firms outside of China, it's crucial to collaborate with a strong local player."

Casey Quirk said that domestic firms must adopt a number of business models to achieve the result of winning 70 percent of the China market's assets by 2030. They include being a “China Champion”, namely being a dominant local brand with a focus on addressing demand for domestic asset classes and domestic investor requirements. Or, a business will take the form of a “global leader”, such as a top 10 global asset manager by assets under management with comprehensive global investment and distribution capabilities anchored by the world's second-largest home client base. A third option is that of the “Pan-Asia Alternatives Specialist”, a firm with expertise in illiquid asset classes across Greater China and the Asia-Pacific region.

Other potential models that could fare well are “China Distribution Specialist” - an asset manager with expertise in retail and high-net-worth client engagement, portfolio construction and best-in-class outsourced investment products – or “Bespoke Virtual Portfolio Manager” – a firm that provides a technology-driven investment solution.