<\/p>\n
Fidelity International (FIL) plans to \u200bexit its wholly owned China fund unit, two people familiar with the matter said, marking one of the biggest retreats by a \u200cglobal asset manager from the world’s second-largest economy.<\/p>\n
London-headquartered FIL, which manages $1.18 trillion in client assets globally, is weighing a total retreat from its onshore fund unit three years after its launch, according to the two people who spoke on condition of anonymity because the exit plan is not public.<\/p>\n
A combination of fierce local competition, frequent leadership turnover and chronic struggles to build scale ultimately \u200bconvinced global FIL executives that the China retail venture was untenable, the people said.<\/p>\n
The planned departure highlights the growing headwinds for foreign financial firms in \u200bChina, with squeezed margins hampering expansion since Beijing allowed fully foreign-owned units in 2020, attracting six global asset managers to set \u2060up new onshore operations including Fidelity and BlackRock (BLK.N), opens new tab.<\/p>\n
“China remains an important market for Fidelity International and we continue to believe it offers attractive long-term opportunities both for \u200bour business and for investors. There is no change to report on our strategy or market presence,” FIL said.<\/p>\n
Boston-based Fidelity Investments originally set up \u200bFIL as its international unit, before spinning it off as an independent business in 1980. Both FIL and Fidelity Investments are chaired by American businesswoman Abigail Johnson.<\/p>\n
It remains unclear how FIL plans to restructure or liquidate its 14 China retail fund products, which hold 4.5 billion yuan ($670 million) in assets. That’s well below a target set for 2029, according to a 2024 internal \u200bdocument reviewed by Reuters. The firm believed then that the China unit needed at least $14 billion in assets to be profitable.<\/p>\n
FIL assets under management peaked one year \u200bafter the unit’s launch at 6 billion yuan, before dropping 25% from there as of the end of June, the latest reports on its China products show.<\/p>\n
The Shanghai-based unit employs \u200cnearly 100 people, \u2060according to one of the sources.<\/p>\n
The China Securities Regulatory Commission told Reuters it has not received any official withdrawal application from FIL.<\/p>\n
Beijing has in recent years pledged to open its financial markets further to foreign players by rolling out measures to ease ownership barriers across funds, banks and insurance, simplifying licensing and expanding investment scopes.<\/p>\n
Any FIL plan to exit its China fund unit would be subject to change and require regulatory approval. The planned exit would, however, represent one of \u200bthe most prominent retrenchments from China’s $5.9 trillion \u200bpublic fund market by a foreign \u2060asset manager over the last decade.<\/p>\n
FIL has so far put $218 million into the unit, the largest among all foreign wholly owned fund houses, topping BlackRock’s $215 million, business registration records showed.<\/p>\n
Just last month, British rival Schroders, opens new tab became the first foreign manager to exit \u200bits wholly owned onshore fund unit \u2014 which managed $250 million in local assets \u2014 offloading its products to Neuberger Berman amid scaling struggles, \u200baccording to announcements from \u2060both firms.<\/p>\n
The Schroders move followed earlier pullbacks by other peers, including Legal & General (LGEN.L), opens new tab, which halted its China expansion plans, and Vanguard, which closed its local fund sales joint venture and abandoned plans to enter the mutual fund sector.<\/p>\n
Any FIL exit from China’s onshore mutual fund market would cap a broader, gradual pullback in China, an economy which lost momentum \u2060at the \u200bstart of the second half of this year on weaker industrial output and consumption.<\/p>\n
FIL cut about 500 positions \u200bat its Dalian technology and operations centre in late 2024 over data concerns, having already cut 16% of the local fund management staff earlier that year amid sluggish growth and cost pressures.<\/p>\n
The China fund management business \u200bhas experienced rapid leadership churn since its inception five years ago, cycling through four board chairmen and three chief executives.<\/p>\n
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