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RBC joins China mutual fund fray

Bank to hold 30-per-cent interest in joint venture with Chinese management firm

Royal Bank of Canada is joining the rush to manage the savings of China's burgeoning middle class by striking a joint venture with China Minsheng Banking Corp., a fund management company.

Canada's largest bank is following a trial blazed by Bank of Montreal and insurers Manulife Financial Corp. and Sun Life Financial Inc. as it attempts to establish a beachhead in one of the world's fastest-growing economies.

RBC has been active on several fronts in China this year. In February, it upgraded its representative office in Beijing to a branch, allowing it to expand services there. In August, it announced the opening of RBC Life Insurance Co.'s new representative office in Beijing.

The joint venture company announced yesterday will create, manage and sell mutual funds in local currency to retail and institutional investors in China from a head office in Shanghai. China Minsheng Bank is the fastest-growing lender in China, according to Bloomberg.

RBC will hold a 30-per-cent interest in the joint venture, China Minsheng Bank will hold an interest of 60 per cent, and Three Gorges Finance Co. Ltd. will hold a 10-per-cent interest. The agreement, which had been the subject of speculation since March, still needs regulatory and other approvals.

"This exciting initiative provides us with an entry point into the rapidly expanding Chinese asset management market," said George Lewis, RBC's executive vice-president of wealth management, in a release.

"The fund management market in China is poised for growth, making this an opportune time to form this joint venture," said Hong Qi, executive vice-president of China Minsheng Bank. "It also serves to reinforce the growing realization that Chinese capital markets offer good potential investment value."

China Minsheng Bank is headquartered in Beijing and listed on the Shanghai Stock Exchange. It says it ranks among the top 10 banks in China with widely held ownership.

Separately, RBC investment dealer arm RBC Dominion Securities Inc. played a minor role in the hugely successful initial public offering of Industrial and Commercial Bank of China. The Chinese bank sold an estimated $21-billion (U.S.) of stock in its debut, with the Canadian dealer responsible for about 1 per cent of the sale as a so-called "co-lead manager." The top tier of brokerage firms on this underwriting would have each taken 25 per cent of the fees.

© 2007 The Globe and Mail. All rights reserved.

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