UBS initiates major restructuring in Chinese private fund sector, cuts a third of staff

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19th April 2024 – (Hong Kong) UBS is implementing a significant reduction in its private funds business in China, shuttering several funds and slashing workforce amid ongoing operational challenges, sources with knowledge of the matter disclosed. The Swiss banking giant will cease operations of up to 17 equity and bond private funds, a move that affects nearly all of its offerings since the inception of its private fund management unit in 2016.

These sources, who requested anonymity due to restrictions on speaking to the media, indicated that the closures are part of a broader strategy to streamline operations and focus on more lucrative segments. This adjustment will lead to a reduction of roughly one-third of the staff at UBS Asset Management Shanghai, which currently employs around 50 people.

The operational scale-back comes at a time when foreign asset managers in China are facing severe headwinds, including competitive pressures from local firms, challenging market conditions, and stringent regulatory environments. These factors have forced many international players to reconsider their strategies and presence in the region.

UBS’s shift will see an increased focus on alternative investment strategies such as funds of funds, and an expansion into cross-border investments. This strategic pivot is aimed at leveraging global markets and diversifying investment risks associated with the Chinese market.

“China remains a key market for UBS, and we will continue to invest strategically,” stated a UBS spokesperson via email, without delving into specifics about the fund closures or the impending layoffs.

This realignment reflects a broader trend among Western asset managers who are recalibrating their business models in China. Notably, firms like Fidelity International and Legal & General have also scaled back their operations, citing similar challenges.

The reduction in UBS’s workforce is particularly poignant as it includes staff hired for a since-aborted plan to establish a new Chinese mutual fund unit. This decision underscores the complexities foreign firms face in navigating the evolving financial landscape in China.

Moreover, UBS has recently benefited from an increased quota under China’s Qualified Domestic Limited Partnership programme, allowing greater capacity for outbound investments. This is seen as a strategic move to capitalize on growing Chinese demand for foreign asset exposure.

With assets under management by UBS Asset Management Shanghai estimated between 2 billion yuan and 4 billion yuan, the firm is refocusing its efforts on areas where it sees potential for growth and stability. This restructuring is part of UBS’s broader global strategy to optimise its asset management operations in response to changing market dynamics and regulatory environments.