Tencent starts fund advisory services to tap asset management

Tech giant joins the bandwagon of fee-based fund advisory service providers amid intense competition in China’s retail fund market 

by Reuters
Tencent starts fund advisory services to tap asset management
The Tencent head office in Beijing. Photo: AFP.

Chinese tech giant Tencent Holding is making forays into fund advisory services, vying for a share of the potentially lucrative market with rival Alibaba Group Holding Ltd, which entered the business just months ago.

Teng An Fund, Tencent's fund distribution unit, starts offering selected investors advisory services this week, according to the company's client service department.

This is the latest sign that Chinese tech majors are bulking up in financial services closer to home amid growing scrutiny of their technology businesses overseas.

The service, which is called Yi Qi Tou and translates as "invest together", recommends mutual fund investments to retail buyers as Teng An has teamed up with fund houses to create suitable investment advisory strategies.

Teng An Fund said the service would be officially launched via WeChat, Tencent's popular messaging app, once the trial period is over, enabling its more than 1 billion users invest in fund products within the app.

The news was first reported by some local media earlier on Wednesday.

Tencent's move came after its main rival Ant Group established a joint venture with US asset management firm the Vanguard Group to offer a similar fund advisory service in China.

Eight licences for mutual fund advisory services

In a move to slowly shift away from the traditional transaction-based model to a fee-based model of selling fund products, China started a round of financial reforms last September by launching a pilot scheme to test the investment advisory business in publicly-offered mutual fund investments.

Under the scheme, the China Securities Regulatory Commission (CSRC), allowed eight firms to conduct mutual fund investment advisory services.

According to news reports, the first batch of licences was given to five firms which include E Fund Management, China Southern Asset Management, China Wealth Management, Harvest Wealth Management and Zhoung Ou Qian Gun Gun.

In December, three more licences were given to Alibaba’s Ant Financial, Tencent’s Teng An Fund, and Yingmi Fund, a venture capital-backed provider of financial management and fund sales services.

In yet another long-promised “big bang reforms” China, last month scrapped foreign ownership limits in almost all areas of its $45 trillion financial sector.

Consequently, Mutual fund houses, brokerages, banks and fund distributors are also rushing to participate.

Given the mounting pressure they are facing overseas due to continued Sino-US disputes, Chinese tech companies, however, are also keen on expanding their stakes in the financial sector.

These companies fear that owing to the US President Donald Trump’s threat on banning short-video app TikTok and messaging service WeChat by late September, the chances of an escalation of the confrontation with Beijing are high.

Beijing-based ByteDance, the owner of the TikTok, was also taking steps to move into the online stock brokerage and wealth management business in Hong Kong, trademark registration documents show.

Despite opportunities abound in China’s newly set up advisory schemes, though, new players could face challenges in introducing new schemes since a fee-based model is new to Chinese retail investors, according to a report by Cerulli Associates, Boston, US-based research firm.

In addition, knowledge of asset allocation remains low in the country’s retail market, the report said.