BlackRock in Talks With Tencent on China Tie-Up
October 02 2019 - 8:03AM
Dow Jones News
By Jing Yang in Hong Kong and Dawn Lim in New York
BlackRock Inc. has held talks over the past year with Chinese
internet giant Tencent Holdings Ltd., as the world's largest money
manager explores ways to strengthen its foothold in China,
according to people familiar with the matter.
The preliminary discussions with Tencent have been about how to
make BlackRock's tools and models for building investment
portfolios broadly available to the Chinese market, the people
said.
China is a market BlackRock has long coveted. The New York-based
company, which has more than $6.8 trillion in assets under
management globally, has had a presence in the world's
second-largest economy for more than a decade and its top
leadership has earmarked China as a priority.
BlackRock manages a few domestic funds for wealthy clients and
institutional investors on the mainland and has offshore investment
funds that hold Chinese stocks and bonds. In June, it said it had
been approved to offer investment advisory services to asset
managers, securities firms and other institutions in the country.
Like other foreign asset managers, BlackRock has so far been
restricted from selling its own mass-market mutual funds in China,
but is expected to apply to do so when Chinese authorities open up
the sector further in the coming year.
Tencent is among a number of companies that BlackRock is in
talks with as it evaluates potential partners in China, said one of
the people familiar with the discussions.
Shenzhen-based Tencent is one of China's largest internet and
technology companies and owns the popular Chinese social-media
network WeChat. It also runs one of the country's two largest
mobile-payment networks and has a burgeoning financial-services
business that sells mutual funds and investment products to about
150 million people in the country.
BlackRock's talks with Tencent are at an early stage and there
is no guarantee that a partnership will result. The discussions are
also taking place while trade talks between Beijing and Washington
are in flux.
There have been differing views among BlackRock staffers about
what a tie-up with Tencent could entail. The discussions have
focused on BlackRock's tools for constructing portfolios and
recommending investment combinations, and how they could
potentially be offered via a Tencent platform, said some of the
people.
There have also been talks about codeveloping a financial
software system modeled after Aladdin, a BlackRock technology
platform that the firm currently uses and sells to other asset
managers and financial institutions, according to one person
familiar with the matter. Aladdin is used by portfolio managers
globally to model risks and help them execute trades. In China,
leading trading and financial-software providers are all domestic
and the largest player is Hundsun Technologies Inc., which is
controlled by billionaire Jack Ma.
Some employees at BlackRock have been encouraging staffers in
Asia to deepen ties with Tencent, according to a person familiar
with the matter, particularly after BlackRock's rival Vanguard
Group formed a joint venture earlier this year with Ant Financial
Services Group, an affiliate of Alibaba Group Holding Ltd. that is
also controlled by Mr. Ma.
The company that Ant and Vanguard jointly incorporated, however,
hasn't disclosed what it plans to do and is still awaiting
regulatory approval to commence business.
Any potential tie-up could give Tencent, which competes fiercely
with Ant in mobile payments and sales of mutual funds, a way to
gain new ground in China's large and fast-growing financial
technology sector. In late September, a Tencent subsidiary and
China International Capital Corp., a state-backed investment bank,
said they had formed a technology joint venture to focus on the
bank's retail brokerage and wealth-management services, among other
things. The companies said the venture may extend services to other
financial institutions in the future.
BlackRock ultimately has ambitions to become a meaningful player
in China's $1.8 trillion domestic mutual-fund industry, which is
expected to expand significantly in the coming years. Earlier this
year, BlackRock appointed a new head of China, Tony Tang,
previously a securities regulator and the former chief executive of
one of the country's largest domestic investment managers. He has
been tasked with developing and executing BlackRock's business
strategy in the country.
At present, BlackRock's China business is relatively small
because of restrictions authorities have placed on the domestic
activities of foreign asset managers. An equity cap on foreign
asset managers' holdings in mutual-fund firms will be scrapped next
year and BlackRock, Fidelity International, and several other large
global money managers are expected to apply for licenses to manage
mutual funds.
Stella Yifan Xie contributed to this article.
Write to Dawn Lim at dawn.lim@wsj.com
(END) Dow Jones Newswires
October 02, 2019 07:48 ET (11:48 GMT)
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