2/16/2020 Ignites Asia - Print Content Page

China's pension funds receiving boost from digital platforms By Echo Huang January 7, 2020

China’s biggest online fund sales platforms are adding more products to dedicated pension and wealth management sections, helping to grow popularity and boost sales.

Widely used fund sales platforms, including Alibaba-affiliate Ant Wealth and Tencent’s Licaitong, have played a hugely significant role in spreading the sales of investment products and money market funds in China.

These platforms could be starting to play the same role to help grow sales individual products as well, just at a time when foreign managers are also entering this part of the market.

Pension fund products now have their own sections on some platforms associated with the idea of stable returns, while on others they contain the label “pension” (养⽼) in their product names.

Licaitong has a "wealth management dedicated section" (理财专区), Ant Wealth has a pension section called "stable wealth management" (稳健理财), while pension products are labelled "stable insurance" (稳健保险) on JD.com-affiliated JD Finance. There are now at least a dozen such products on these platforms, with more investors now paying attention to the products.

There has been an uptick in interest from investors in buying pension fund products through the wealth management platform, a Licaitong spokesperson tells Ignites Asia.

In fact, some investors have even been waiting for the subscription of certain pension products to open so they can be the first to invest, the spokesperson says.

China Life Pension Company, in which Australia’s AMP Capital has a 19.9% stake, saw its reach more than Rmb1 trillion (US$140 billion) as of November 2019. This was driven by an average annual growth of 30% over the past five years that is being boosted by online sales of pension products.

The company claims to have become "an important cooperation partner for major Internet finance platforms". Assets in its individual pension products reached Rmb300 billion, taking up around a third of its AUM as of November.

China Life Pension Company currently has four products on Licaitong, all of which are branded as "individual pension guarantee management products". https://www.ignitesasia.com/pc/2614893/315323?all=true 1/4 2/16/2020 Ignites Asia - Print Content Page One product from the company, called Guo Shou Guang Yuan 366* (国寿⼴源366), has an annual yield growth of 4.72% and a lock-up period of 366 days. The product, which asks for a minimum investment amount of Rmb1,000, has recorded more than 970,000 subscriptions, according to fund documents.

Global firm involvement

Other dedicated pension fund managers with numerous products on online platforms include China Taiping Pension, PingAn Pension, Taikang Pension and Changjiang Pension Insurance.

While others that focus on selling pension mutual funds include Zhong Ou Asset Management, China Southern Asset Management, China Asset Management and TEDA Fund Management. Most of their products are funds of funds.

Zhong Ou Asset Management, for instance, is selling two target-risk funds on Licaitong. Both funds of funds have a lock-up period of three years and have recorded a yield of around 19% since launch.

Calvin Chiu, head of retirement business in Asia for Manulife , says the fact that these online digital platforms have created a new dedicated section for pension products has been beneficial, as they are not hidden away or commingled with all the other mutual funds.

Investors do not have to look through a thousand mutual Calvin Chiu, Manulife Investment funds to find a of couple retirement products. These Management online distributors design a landing page for retirement so investors can easily find all the retirement theme product in one place, he says.

Manulife currently has one target-risk product on Licaitong and Ant Wealth. The Manulife TEDA Tai He Pension* (泰达宏利泰和养⽼) target-risk fund has a three-year lock-up period and has recorded a 9.12% yield since launch, information on Licaitong shows.

Chiu says online platforms are not necessarily trying to Related Content attract large contributions, but just get young people,

January 6, 2020 who are the biggest users of online platforms, into the habit. China lays out new policies for individual pension products The advantage of these online platform is that they are designed in a similar way to Yu’E Bao in China, so if December 31, 2019 investors have a small amount of money left over, they BlackRock, Temasek team up to can now easily select pension products in which to pursue new China JV with CCB channel it, he adds. (December 23)

https://www.ignitesasia.com/pc/2614893/315323?all=true 2/4 2/16/2020 Ignites Asia - Print Content Page December 13, 2019 China’s individual third-pillar pension could be potentially Dutch manager APG tackles human very lucrative not just for domestic firms, but for foreign rights issues in China ESG push players such as Manulife and AMP Capital, and Chinese authorities are opening new avenues for global firms to enter the sector.

China’s central bank announced in July last year that it would allow foreign institutions to invest in the establishment or make an equity investment in “pension management companies”, according to a statement issued by the central bank on July 20.

In March, Heng An Standard Life, the China joint venture between and Tianjin TEDA International, became the first foreign insurance joint venture in China to set up a pension insurance company.

Underlying risks

But with more investors now picking and choosing their pension products online rather than receiving advice, some questions have been raised about the appropriateness of some strategies for retail investors.

Some pension fund products issued by the affiliated asset managers of insurance companies lack transparency of the underlying assets, says Rachel Wang, Morningstar’s director of research in China.

All four of China Life Pension’s products sold on Licaitong invest not only in liquid assets and fixed income, but also in non-standardised assets with "relatively high credit Rachel Wang, Morningstar levels," according to product descriptions. Some other pension products sold directly to retail investors invest in real estate.

Wang says such products are hard for investors to evaluate compared with standard products, which offer much higher transparency of their underlying assets. In theory, pension products should focus on equities, the approach commonly used in markets like the U.S. and the U.K., where individual retirement investment is more mature.

“Big platforms such as Ant and Tencent’s could make investors feel that these products are relatively lower risk,” says Wang, “Lots of investors using these platforms are risk adverse, they might want to buy such products that can take just Rmb1,000.”

There are also questions of product promotion standards and the mechanism used on those tech platforms, which tend to be obscure.

For instance, Licaitong labels two products, including Guo Shou Guang Yuan180* (国寿⼴源180), a product by China Life Pension, as "hot".

https://www.ignitesasia.com/pc/2614893/315323?all=true 3/4 2/16/2020 Ignites Asia - Print Content Page The two-year-old product, which has a lock-up period of 180 days, has subscriptions of around 2.4 million as of writing. There are other products with higher subscriptions that are not labelled as hot. A Licaitong spokesperson said there is no definition on the label.

On Ant Wealth, Guo Shou Weekly Win* (国寿周周赢) by China Life Pension is one of the two products located on the first page of the stable wealth management section.

The platforms guide investors to certain products by putting them in the most eye-catching places, especially on mobile devices, which have relatively small screens, says Morningstar’s Wang.

“Putting products in more eye-catching spots has a very strong effect on direct investors,” says Wang. “For those that stand out on the platforms, their brand is being promoted and investors will click through.”

*The names are direct translations from Chinese.

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