Fund executive turnover on rise in China
Portfolio managers have been exiting Chinese mutual fund houses at an accelerating rate this year thanks to a new law making it easier for them to set up their own private funds.
And general managers at fund firms have been switching firms to investment arms of Chinese insurers and brokers, which have been permitted to launch such businesses after new rules came in last year.
This year 194 portfolio managers had resigned from mutual fund houses in China as of December 5, almost a fifth of the 1,014 managers in the industry, according to data from Shanghai-based data provider Wind Info. That compares with 138 managers handing in their notice last year and 110 in 2012.
Wind Info, which analyses firms’ public records, did not record the managers’ destinations, but analysts said most had set up their own private funds.
One likely driver of this increased turnover is the amendments to the Securities Investment Fund Law in June 2013 that allow brokers, insurers and other firms to enter the public mutual fund business.
The new law has had a major impact because of how the registration system works, said Chen Bo, fund analyst at Shanghai-based third-party distributor Howbuy. Under the new rules, which have made it easier and faster to set up private funds, all such vehicles have to be registered with the Asset Management Association of China.
One such move was the departure of star manager Wang Ruyuan from Shenzhen-based Baoying Fund Management, who resigned in September and registered her own private fund in November.
As at least part-owners of their own private vehicles, Chen said portfolio managers going into business for themselves stood to reap a lucrative share of the profits.
Some managers had also quit for reasons such as poor performance appraisals and regulator probes into insider dealing, he noted.
Meanwhile, the number of general manager resignations is broadly consistent with the past two years' figures, with 13 departures as of the end of November, said Shanghai-based consultancy Z-Ben Advisors. But the reasons for the exits are different this year.
Insurance firms and brokerages have been poaching experienced managers for their new fund businesses, explained January Sun, analyst at Z-Ben. These new units are potentially major players in the industry, she added.
Sun noted that this trend started in the fourth quarter of last year. Fan Yonghong, former general manager of China Asset Management, joined China Life Asset Management as chief investment officer in November last year. And Wang Hao, Da Cheng Fund Management’s general manager, quit in July last year this year to join PICC Asset Management, the investment arm of the People's Insurance Company of China.
These senior moves also reflect problems among joint-venture fund houses. Before BNY Mellon exited its 49% stake in its JV, BNY Mellon Western Fund Management, in October, its general manager Chen Zhe left. The company is now seeking a new boss.
In the case of SSgA Fund Management, State Street Global Advisors' China JV, the firm has rebranded itself as Zhongrong Fund and promoted chief compliance officer Wang Yao to general manager. This followed foreign shareholder SSgA selling its 49% stake in the JV in September.