Weak Demand Dims Interest in Small Chinese Public Funds

Small- and medium-sized public funds in China, once a rare resource within the financial industry, have faced challenges in attracting buyers in recent years despite multiple efforts and discounts.

The limited competitiveness and subpar management of these funds are among the primary reasons behind their relatively low investment appeal and valuation prospects. Additionally, their small operating revenues—closely tied to the size of assets under management—contribute to this issue, according to industry experts.

Over 60 percent of fund companies manage assets under CNY100 billion (USD 14.7 billion), whereas industry leaders boast valuations exceeding CNY2.5 trillion (USD 366.6 billion), according to Wind Information. The stark difference stems from systemic hurdles faced by smaller funds, including weaknesses in research capabilities, distribution channels, and branding resources.

On April 9, Zhejiang Native Produce and Animal By-Products Import and Export Group listed a 20 percent stake in Topsperity Fund Management for auction on the Zhejiang Property and Stock Exchange, starting at CNY128 million (USD 18.8 million). The company had previously attempted to sell the same stake in June last year for CNY142 million but received no offers.

Topsperity Fund’s financial stability has been inconsistent. Its revenue dropped sharply—by 71 percent last year to CNY64.9 million (USD 9.5 million)—and it swung from a net profit of CNY13.3 million to a net loss of CNY11.2 million. As of March 31, the fund’s net asset value stood at CNY73.4 billion (USD 10.8 billion), placing it 77th among China’s 164 fund companies, according to Wind data.

Meanwhile, Guolian Minsheng Securities and French bank Edmond de Rothschild, the second- and third-largest shareholders of Zhonghai Fund Management, auctioned off their combined 58.4 percent stake for CNY267 million on April 3 via the Shanghai United Assets and Equity Exchange.

Huachen Trust, the largest shareholder of Mirae Asset Management, tried to sell its 40 percent stake for CNY17.2 million last November, but no buyers emerged. In December, the trust reduced the asking price by over 70 percent to CNY4.8 million. However, when the auction ended at the end of January, no bids had been received.

Experts recommend that small- and medium-sized fund companies shift away from overly broad and comprehensive strategies. Instead, they should concentrate resources on niche areas such as quantitative strategies, “fixed income plus,” and industry-specific fields to establish distinctive expertise and compete more effectively with leading firms, according to a financial analyst at a major securities firm.