What’s new: Chinese investment conglomerate Zhongzhi Enterprise Group will consolidate its four wealth management units into one and keep only one independent fund sales license.
The consolidation is at the request of regulators as part of China’s efforts to tighten oversight of the nation’s $13 trillion asset-management industry.
Zhongzhi’s four wholly owned licensed wealth management units—Beijing Hengtian Mingze Fund Sales Co. Ltd., Beijing Zhixin Fund Sales Co. Ltd., Beijing Tangding Yaohua Fund Sales Co. Ltd. and Beijing Shengshi View Fund Sales Ltd.—will be combined into Beijing Zhongzhi Fund Sales Co. Ltd., the group said Friday in a statement.
Zhongzhi Wealth Holdings Co. Ltd. and the four units will become shareholders of the new company with registered capital of 350 million yuan ($55 million).
Zhongzhi Fund will sell publicly offered funds and standard private equity funds. Customers can request redemption of previously purchased products normally without any impact, the company said.
The background: When the China Securities Regulatory Commission implemented measures for supervision of fund distributors of publicly offered securities investment funds Oct. 1, 2020, big wealth management firms were required to reduce their nonstandard business. According to the measures, licenses for selling publicly offered funds must be clear in business scope, and independent fund sales companies can’t sell nonstandard private equity funds or credit products.
Zhongzhi through its sprawling units manages nearly 1 trillion yuan of assets, including mutual funds and private equity funds. But risks also emerged as the business expanded. The company’s financial condition worsened since 2019 amid tightening regulations and a nationwide crackdown on financial risks from reckless investments by financial conglomerates.
Zhongzhi founder and controlling shareholder Xie Zhikun died last month, apparently from a heart attack, casting a shadow over the conglomerate’s future.
Contact reporter Denise Jia (huijuanjia@caixin.com) and editor Bob Simison (hello@caixin.com)
Get our weekly free Must-Read newsletter.
