Exclusive-UBS shuts some China private funds, will lay off staff, sources say

By Selena Li and Samuel Shen

HONG KONG (Reuters) - UBS is shutting down some of its China private funds business and will lay off one-third of the staff as the Swiss bank cuts operating costs in the country, said three sources with direct knowledge of the matter.

UBS will shut up to 17 of its equity and bond private funds and return the money to the investors, out of 19 funds launched since the private fund management unit started in 2016, said two of the three sources. In China, private funds are equivalent to hedge funds and private equity funds, serving high net worth and institutional investors.

As a result, the fund management unit, UBS Asset Management Shanghai, will soon start laying off around one-third of its team of 50, the two sources said, joining other global asset managers that have cut headcount in China in recent months.

The firm plans to focus on alternative strategies such as funds of funds and is moving to expand private funds investing into overseas markets, all three of the sources said.

The sources declined to be named as they were not authorised to speak to the media.

"China remains a key market for UBS, and we will continue to invest strategically," a UBS spokesperson said in an email statement to Reuters, without commenting on the fund closures or the layoffs.

The scaling back underscores how foreign asset managers are struggling to grow in China, faced with cost-cutting pressure, intense competition from local peers in the private fund space and sluggish returns from Chinese markets.

As a result, several Western asset managers including fund giant Fidelity International and British insurer and asset manager Legal & General have cut their local workforce or halted expansion plans.

Last year, UBS halted plans to set up a new Chinese mutual fund unit, first considered in 2021, deciding instead to keep a joint venture fund business formed after its takeover of Credit Suisse.

Staff UBS had hired since 2021 for setting up the new mutual fund unit that became part of UBS Asset Management Shanghai will be among those laid off, the three sources said, including employees in the front, middle and back office departments.

Five of the 19 private funds launched by UBS have already been closed, according to data from the website of the Asset Management Association of China (AMAC), a fund management industry association.

ALTERNATIVE, CROSS-BORDER FUNDS IN FOCUS

The Swiss financial group is reallocating resources across areas of the asset management market in China, consolidating platforms and absorbing resources from Credit Suisse, two sources said.

For instance, UBS has now acquired an additional $500 million quota under China's cross-border Qualified Domestic Limited Partnership programme (QDLP), previously owned by Credit Suisse, to invest for domestic clients in offshore assets, according to one of the two sources.

The new quota boosts UBS' quota by six times from previously only $100 million, allowing the bank to tap more outbound investment demand with one or two more QDLP fund launches in the pipeline for this year, the source said.

With the two mutual fund joint ventures focusing on traditional equities and bond investment, the bank is also eyeing boosting fund of funds offerings via the Shanghai asset management unit, the source added.

The assets under management by UBS Asset Management Shanghai are estimated somewhere between 2 billion yuan ($276.27 million) and 4 billion yuan as of Thursday, the AMAC data showed.

($1 = 7.2376 Chinese yuan renminbi)

(Reporting by Selena Li in Hong Kong and Samuel Shen in Shanghai; Editing by Sumeet Chatterjee, Christian Schmollinger and Susan Fenton)