Summary of Key Points
Recent activities in the foreign public fund sector have been quite significant: on one hand, foreign shareholders have continuously made substantial capital contributions (with multiple institutions making investments several times); on the other hand, these funds have faced issues such as frequent changes in management and a stark divergence in scale and performance. The nine wholly foreign-owned public funds can be divided into two camps. Institutions that have converted from joint ventures to wholly foreign-owned ones (such as Morgan Fund) have achieved a scale of over 200 billion yuan due to their local presence, while the six newly established institutions (such as BlackRock and Fidelity) mostly fall into a “scale gap” (with half having assets of less than 5 billion yuan). Despite still struggling with adaptation, some of these institutions have begun to move away from relying solely on their global brand image and are focusing on differentiated innovation to better suit the Chinese market.
I. Shareholders Continuously Provide Support, but Management Changes Are Frequent
Foreign shareholders show tangible support for their investments in China: Lubao Fund has received four capital injections in just over three years (with its registered capital increasing from 100 million yuan to 600 million yuan), while Fidelity Fund has made seven investments (although the amount of each investment has been decreasing). However, the management has been unstable—Fidelity Fund has had one general manager change in one year and three chairmen in three years; BlackRock has had two chairmen and three general managers change in five years. Such frequent changes in leadership affect the implementation of company strategies and the continuity of business operations, similar to a new leader taking over a team with existing work-in-progress.
II. The Gap in Scale Widens: A Chasm Between New and Established Institutions
There is a clear disparity in scale among the nine wholly foreign-owned public funds:
- Established Players That Have Converted to Wholly Foreign-Owned Status: Morgan Fund has a scale of over 230 billion yuan (four times that of a medium-sized domestic institution), and Hongli and Morgan Stanley Funds have scales of 114.4 billion yuan and 30.5 billion yuan, respectively. These institutions, having been joint ventures for many years, have built up local channels, research capabilities, and investor trust, which gives them an advantage after converting to wholly foreign-owned status.
- Newly Established Institutions: The six newly established funds together have only a total scale of 336 billion yuan, which is less than that of a medium-sized domestic institution (the industry median is 590 billion yuan). Among them, Lubao Fund has just 600 million yuan, Fidelity has less than 4.5 billion yuan, and Schroeder and Allianz have less than 1.8 billion yuan. It’s like a newly opened store without a customer base; naturally, they cannot compete with established firms that have been in the market for over a decade.
III. Performance Varies Dramatically: Localization Is the Key to Success
The difference in scale is accompanied by a huge gap in performance:
- Newly Established Institutions: 77% of their 61 products had returns of less than 5% within the year, with some even experiencing losses of 11% (for example, Fidelity Inheritance 6).
- Institutions That Have Converted to Wholly Foreign-Owned Status: One-third of their 240 products had returns exceeding 10%, with Hongli Prosperity Leading earning an impressive 88%.
The reason is simple: the Chinese market is more competitive—investors have a lower tolerance for losses and shorter evaluation periods (unlike overseas markets that look at 3-5 years). Domestic institutions have decades of local experience, while foreign strategies may not be suitable. For instance, domestic firms know that Chinese retail investors tend to follow hot trends, whereas foreign funds might still adhere to long-term value investing, leading to poor performance and customer loss.
IV. Seeking a Way Out: Differentiated Innovation + Connecting Domestic and International Markets
Some foreign public funds are starting to adapt more effectively:
- Differentiated Products: Fidelity has launched a pension target fund, drawing on mature overseas experiences, while RoboMarkets focuses on resource selection themes, leveraging its own strengths.
- Introducing Overseas Methods: They are adopting practices such as “buyer-centric investment advisory” (selecting products from the investor’s perspective) and “lifecycle pension management” (adjusting investment portfolios based on age).
- Serving as a Bridge Between Domestic and International Markets: There is an increasing demand from overseas institutions for Chinese assets. Foreign public funds can help foreign investors buy Chinese stocks/bonds, and at the same time, they can provide Chinese investors with access to global assets.
In short, foreign funds can no longer rely solely on their international brand image. They need to act like entrepreneurs, leveraging their international strengths while adapting to the competitive nature of the Chinese market—by studying Chinese policies, understanding retail investor preferences, and building local channels to truly establish a foothold.
Conclusion
The past five years have seen foreign public funds in China transition from struggling with adaptation to gradually fitting in. While shareholder support is a sign of confidence, survival depends on localized research and development, stable management teams, and differentiated products. After all, the market only recognizes performance and customer needs, not just a foreign background.