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Amundi hit by €16bn outflow from China joint venture

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Amundi was hit by an unexpected €16.3bn of outflows from a joint venture in China that underlined the risks to asset managers doing business in the country and stifled gains from buoyant financial markets.

Europe’s largest asset manager recorded €200m of inflows in the three months to the end of September, the group said in a statement on Thursday. This was far behind both the €10.5bn forecast by analysts surveyed by Bloomberg and the €34.7bn it raked in during the same quarter last year. 

Shares in the Paris-based group dropped 2.7 per cent on Thursday, despite its quarterly profit beating estimates and overall assets under management in line with forecasts.

Amundi experienced €16.3bn of outflows from a joint venture with the Agricultural Bank of China. “There was a specific one-off outflow of €11.6bn, which is related to a change in ABC’s internal asset allocation,” Nicolas Calcoen, head of finance, said in an interview. 

ABC decided to reallocate the money away from the joint venture and run it internally, he added, reflecting how banks in China have been encouraged to finance more of the national economy and “reinternalise” their proprietary assets and cash flow.

Another €4.1bn that left the JV was due to outflows from low-margin products, which are being unwound.

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“Joint ventures between Chinese banks and western asset managers have been growing very quickly and are starting to get more lucrative,” said Tom Mills, an analyst at Jefferies. “This may result in a question of whether the local banks want to continue to give up part of the economics to their partner — or whether they want to go it alone. The risk over time is that the Chinese banks de-emphasise these partnerships.”

Calcoen said this was not a concern. “The core business of the joint venture — to manage mutual funds for the ABC network and other distributors — has good momentum, and its contribution to our group profit is increasing,” he added. “This doesn’t change our long-term view on the JV,” which has been in place since 2008.

Last year Amundi launched its second joint venture in China, teaming up with Bank of China for a wealth management subsidiary. It is one of several early overseas movers into the world’s second-largest economy, alongside BlackRock, JPMorgan Asset Management and Goldman Sachs Asset Management from the US, and London-based Schroders.

Lured by the prospect of growth and by the country’s liberalisation of its financial markets, they are launching asset management and wealth management joint ventures to create investment products for the vast and growing pool of savers. Newly installed Amundi chief executive Valérie Baudson is targeting Asia as an important area for growth.

Amundi recorded adjusted net income of €333m in the third quarter, beating analyst consensus estimates of €286m and up 41.5 per cent on the same period last year. Overall assets were up 8.9 per cent year on year, to €1.8tn. The group’s acquisition of Lyxor from French bank Société Générale is scheduled to complete by the end of December, to accelerate its position in the fast-growing business of exchange traded funds.

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