Things could be looking up for the somewhat beleaguered AMP Limited (ASX: AMP). Since last year when it announced an increase in experience losses within its wealth protection business, the insurer and wealth manager has been out-of-favour with the market resulting in a share price languishing near 52-week lows.
It’s possible the market might be placing too much importance on the troubled wealth protection division given other divisions appear to be firing. This week AMP announced that it has raised $2.2 billion in funds for its inaugural Chinese mutual fund in a joint venture (JV) with China Life Asset Management. AMP only announced the creation of the JV in September 2013, so to this week announce $2.2 billion in funds from an initial public offering would suggest the JV is off to a great start.
According to the Asset Management Association of China, the Chinese mutual fund industry is expected to grow at 15% per annum, reaching $1.6 trillion by 2017. It would appear a sensible move for AMP to not only expand into China, but to do so by aligning itself with China Life – which is China’s largest insurer.
There are few Australian listed financial services companies which can provide investors with access to the potential growth in China’s funds under management, however the domestic fund managers have provided impressive returns for investors over the past year, thanks to their leverage to rising equity markets. Perpetual Limited (ASX: PPT), BT Investment Management Ltd (ASX: BTT) and Platinum Asset Management Limited (ASX: PTM) have seen their share prices surge 34%, 131% and 55% higher in the past 12 months.
The fund managers listed above are well positioned to continue to benefit from fund inflows and higher funds under management (FUM) balances. AMP will also benefit from these trends, but at the same time has positioned itself to benefit from the much larger opportunity that the Chinese funds management industry presents.
The likely short-term problem facing AMP’s wealth protection business may just have created a long-term buying opportunities for investors.
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Motley Fool contributor Tim McArthur owns shares in Perpetual Ltd and BT Investment Management Ltd.