Key facts
- Fidelity International plans to exit its wholly owned China fund unit.
- The unit manages 4.5 billion yuan ($670 million) in assets.
- Reasons cited include fierce local competition, leadership turnover, and difficulty scaling.
- FIL stated China remains an important market with long-term opportunities.
- FIL has invested $218 million into the unit.
- Rival Schroders recently exited its wholly owned onshore fund unit.
Fidelity International (FIL) is reportedly planning to withdraw from its wholly owned China fund unit, a move that would signify a major retreat by a global asset manager from the world's second-largest economy. The decision, according to sources familiar with the matter, is driven by intense local competition, frequent leadership changes within the unit, and persistent difficulties in achieving scale and profitability.
FIL, which manages $1.18 trillion in client assets globally, has invested $218 million into its China venture, the largest among foreign wholly owned fund houses, surpassing BlackRock's $215 million. However, the unit's 4.5 billion yuan ($670 million) in assets under management falls significantly short of its 2029 target and the estimated $14 billion needed to be profitable. Assets peaked at 6 billion yuan shortly after launch and have since declined.
The planned exit highlights the challenges foreign financial firms face in China, where squeezed margins have hampered expansion since Beijing allowed fully foreign-owned units in 2020. This comes after British rival Schroders became the first foreign manager to exit its onshore fund unit last month, offloading its products to Neuberger Berman due to scaling struggles. Other firms like Legal & General have halted expansion plans, and Vanguard closed its local fund sales joint venture.
FIL stated that China remains an important market with attractive long-term opportunities and that there is no change to its strategy or market presence. The China Securities Regulatory Commission confirmed it has not received any official withdrawal application. The Shanghai-based unit employs nearly 100 people, and FIL has previously cut hundreds of positions at its Dalian technology and operations centre and reduced local fund management staff amid sluggish growth and cost pressures.