Johannesburg — OLD Mutual has acquired a 49% stake in a China-based asset management company, ABN Amro Teda Fund Management, which has 2,05bn in assets under management, for the seemingly high price of 165m in cash.

Analysts yesterday questioned why the acquisition seemed so expensive. "Old Mutual must come out with more information," said Cadiz African Harvest insurance analyst Rajay Ambekar, who said he did not expect the purchase to affect Old Mutual's earnings for at least five to 10 years.

Coronation Asset Management insurance analyst Neil Young said the purchase price "looks enormous" relative to the assets under management. "Clearly, Chinese asset management companies don't come cheaply."

However, he said, the acquisition was within Old Mutual's strategy of "building its presence in the east".

Old Mutual spokesman Deward Serfontein said the price may seem high , but it was a strategic buy and asset management businesses were not for sale very often in China.

He said the acquisition was made with the idea of gaining an early foothold in the fast-growing China asset management market in the long term, over five to 10 years at least.

To establish a greenfield operation of similar size would take five to nine years, and it was rare to gain such a siz able shareholding in a China financial services company. Most companies could only gain 20%-35% stakes.

To give an idea of the growth potential of the asset management market in China, he said, at present 88% of all savings in China were in the form of cash deposits, as opposed to 17% in the US . Only 1% of the country's wealth was held in asset management businesses.

Overall assets under management in China were expected to grow from $156bn in 2006 to about $1,4-trillion by 2016, he said.

Old Mutual bought the stake from international financial services group Fortis. The remaining 51% of ABN Amro Teda, founded in 2002, is owned by Teda, a large investment company owned by the city of Tianjin in China.

The acquisition was made possible because Fortis had to sell one of two companies in China for regulatory compliance reasons, after Fortis's acquisition in April of the asset management business of ABN Amro Group.

Lex Kloosterman, a member of the Fortis Group executive committee and responsible for asset management, said : "We had to sell one of two very successful companies, namely Fortis Haitong or ABN Amro Teda Fund Management. Teda supported the choice for Old Mutual as a buyer."

Old Mutual's Asia Pacific president, Steffen Gilbert, said the joint venture would play a significant role in developing the international strategy of the group.

"This is a rare opportunity to buy a siz able stake in a well-established and well-managed asset management business in the region. We have been impressed by the joint venture's management team and the achievements they have made," he said.

The partnership established Old Mutual's presence in the Chinese asset management market and laid the foundation for Old Mutual Group's further expansion in Asia, he said.