Fidelity International is preparing to exit its wholly owned China fund management unit, according to sources familiar with the matter, as weak demand and regulatory constraints erode profitability in the world’s second-largest fund market.
The London-based asset manager, which manages $1.18 trillion globally, launched its onshore fund operations in China in 2020 following Beijing’s relaxation of foreign ownership rules. Its 14 retail fund products held 4.5 billion yuan ($670 million) in assets as of the end of June, down 25% from a peak of 6 billion yuan reached one year after launch. An internal 2024 document cited a minimum asset threshold of $14 billion required for profitability, with a 2029 target set for reaching that level.
FIL has invested a total of $218 million into its China unit, the largest commitment among foreign wholly owned fund houses, surpassing BlackRock’s $215 million. The unit employs nearly 100 people in Shanghai and operates alongside a broader technology and operations center in Dalian, where FIL cut about 500 positions late last year. Earlier in 2024, the company reduced its local fund management staff by 16%.
The planned withdrawal follows a broader retreat by foreign asset managers from China’s fund industry. British rival Schroders became the first to exit its wholly owned onshore unit just last month, while other global firms such as BlackRock, Neuberger Berman, Legal & General, and Vanguard maintain operations amid subdued growth. China’s public fund market, valued at $5.9 trillion, has faced headwinds from weaker industrial output and consumption in the second half of 2024, contributing to a slowdown in asset inflows.
A spokesperson for Fidelity International told Reuters that the company remains committed to China as a long-term market, stating there has been no change to its strategy or market presence. The China Securities Regulatory Commission confirmed it has not received any official withdrawal application from FIL.
