Principal Financial Group, an American investment and asset management firm, expects to get a significantly bigger share of the mandatory provident fund (MPF) market with its acquisition of the MPF business of AXA Hong Kong.
The deal, worth HK$2.6 billion (US$335 million), will close in the third quarter next year and is expected become profitable in three years, the Hong Kong Economic Journal reported Monday, citing Rex Auyeung, Principal Financial president for Asia.
Principal’s ranking in Hong Kong’s MPF business is expected rise three notches to fifth, the report said.
The company will benefit from lower average unit cost from improved economies of scale, Auyeung was quoted as saying.
MPF management fees could fall further as the government pushes low-cost core funds, he said.
Principal and AXA will set up a steering committee to oversee the merger.
The new acquisition will be run separately from Principal’s MPF business.
In November, Principal signed a 15-year exclusive distribution agreementunder which it sells retirement funds through AXA Hong Kong.
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