Recent developments in the financial landscape of China have brought significant changes to the investment management industry, particularly marked by a noteworthy shift in the ownership structure of one of the leading fund companies, ICBC Credit Suisse Asset Management Company (ICBC Credit Suisse). Following regulatory approval, UBS has stepped in to replace Credit Suisse as the second-largest shareholder of the company, indicating a new chapter in its operational dynamics.

ICBC Credit Suisse, known to many as a prominent firm backed by the Industrial and Commercial Bank of China—the largest bank in the world—has recently been grappling with challengesOver the past few years, the firm has witnessed an exodus of talent, a significant decline in the assets of its equity products, and a fall in its market ranking, necessitating urgent strategic reforms to reinvigorate its position in a highly competitive market.

One of the contributing factors to ICBC Credit Suisse's recent struggles is tied to its stakeholder adjustmentsThis development is closely linked to UBS's acquisition of Credit Suisse, which was fully integrated by the end of May 2024. With this merger, UBS has assumed responsibilities for Credit Suisse's assets, including its 20% stake in ICBC Credit SuisseHowever, ICBC remains in a dominant position, retaining an 80% controlling stake in the asset management company, solidifying its strategic influence.

UBS's entry into the Chinese market spans over three decades, during which it has invested significantly in establishing its footprint, including holding 49% of the Guotai Junan Fund, a clear demonstration of its commitment to wealth management in China

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Following this change, UBS has appointed Hu Zhihe, the president of UBS China, as its board representative at ICBC Credit Suisse, hinting at the possibility of further collaboration aimed at enhancing investment strategies and asset allocation between the entities.

At this crossroads, ICBC Credit Suisse's growth has stagnated, exhibiting minimal increase in asset size over recent yearsAfter peaking above RMB 800 billion in 2021, the firm only saw its assets rise to RMB 8375.67 billion by the end of 2024, a marginal gainConcurrently, its rankings within the asset management sector have quickly deteriorated, from the ninth position in 2021 to the thirteenth by 2024. This slide is particularly alarming for a firm previously buoyed by its access to ICBC's expansive distribution network.

In the past, the firm capitalized on the booming market for non-equity funds, helping it to rapidly increase its assets beyond RMB 450 billion by 2016, and surpassing RMB 700 billion the following year, achieving the second-highest ranking in the industryHowever, this trend has been reversed as it faces fierce competition in the non-equity fund sector, leading to a downturn in overall growth momentum.

In the realm of profitability, ICBC Credit Suisse has also faced significant challengesThe firm experienced losses of RMB 85.75 billion and RMB 358.84 billion in 2022 and 2023, respectively, totaling an alarming RMB 444.59 billionThough the company managed to turn a small profit in the first half of 2024, it amounted to just RMB 18.63 billion—an insignificant recovery compared to the prior years' lossesA critical factor in this struggle is the underperformance of its equity products, which have lagged far behind expectations.

The slow decline of ICBC Credit Suisse is encapsulated in its approach to fund management, which has historically emphasized fixed-income investments over equities

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As of the end of 2024, a staggering 80.03% of the company's assets were tied up in non-equity fund types such as bonds and currency funds, which collectively totaled RMB 6703.46 billion, while equity funds, including hybrid and stock categories, held just RMB 1510.58 billionThis ratio starkly contrasts with the conditions of 2021 when these ratios were more balanced.

The decline of equity funds has been pronounced, particularly as the domestic stock market in China has faced broader challengesIn an environment that previously favored equities until 2021, ICBC Credit Suisse boasted a competitive standing in both mixed and equity fund categoriesHowever, as of the end of 2024, the assets in its mixed funds saw a drastic drop to RMB 541.96 billion, exacerbated by the prevailing intense competition within the non-equity sector.

The performance of ICBC Credit Suisse's equity products has also drawn scrutinyAccording to data from Wind, the average returns on its equity and mixed funds have languished at -15.15% and -14.06% over the past three years, barely keeping pace with industry averagesEven more concerning, during a recent stock market recovery in 2024, the fund’s annualized returns only reached 11.72% and 8.13%, ranking them well below industry averages.

Internal pressures contribute to these challenges, particularly the loss of key talentThe past couple of years have seen prominent fund managers at ICBC Credit Suisse leaving the organization in rapid successionNotable departures include industry figures such as Zhao Xiancheng and Yan Siqian, representing significant losses for the firmIn total, 15 fund managers detracted from ICBC Credit Suisse between 2022 and 2024—a startling rate of talent attrition that ranks among the highest in the sector.

The wave of departures reflects both individual migration and potentially systemic issues within the firm

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