According to three people with direct knowledge of the situation, UBS is cutting costs associated with its operations in China by closing portions of its private funds business and laying off one-third of its workforce.

According to two of the three sources, UBS plans to close up to 17 of its 19 equities and bond private funds since the private fund management unit was established in 2016 and refund the investors’ money. Private funds, which cater to institutional and high net worth investors, are comparable to hedge funds and private equity funds in China.

According to the two sources, UBS Asset Management Shanghai, a fund management company, will soon begin letting go of about one-third of its fifty-person workforce. This will put it in line with other international asset managers that have recently reduced their workforce in China.

According to all three of the sources, the company intends to concentrate on alternative tactics such funds of funds and is expanding private funds investment into foreign markets.

Since they were not permitted to speak with the media, the sources chose not to be identified.

“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 demonstrates how difficult it is for foreign asset managers to expand in China due to pressure to reduce costs, fierce competition from local peers in the private fund industry, and weak returns from Chinese markets.

As investors processed the most recent economic statistics and remarks from Federal Reserve officials—who hinted that the central bank is unlikely to drop interest rates anytime soon—U.S. stocks closed Thursday mostly lower.

Consequently, a number of asset firms in the West, such as the massive fund Fidelity International and the British asset management and insurer Legal & General, have reduced their local staff or put an end to their expansion strategies.

Last year, UBS decided to stick with the joint venture fund company that it had established following its acquisition of Credit Suisse, abandoning plans to establish a new Chinese mutual fund arm, which had been contemplated since 2021.

Those laid off include front, middle, and back office staff that UBS hired starting in 2021 to establish the new mutual fund operation that became a part of UBS Asset Management Shanghai, according to the three sources.

According to data opens new tab from the website of the Asset Management body of China (AMAC), a fund management industry body, five of the 19 private funds that UBS formed had already closed.

According to two sources, the Swiss financial group is consolidating platforms, reallocating resources across segments of the Chinese asset management sector, and acquiring capabilities from Credit Suisse.

For example, one of the two sources claims that UBS has now obtained an extra $500 million quota under China’s cross-border Qualified Domestic Limited Partnership programme (QDLP), which was previously held by Credit Suisse, to invest in offshore assets for domestic clients.

With one or two more QDLP fund launches planned for this year, UBS will be able to meet the increased demand for outbound investments thanks to the new quota, which increases the bank’s quota by six times from its prior level of only $100 million.

According to the source, the bank is considering increasing fund of funds offerings through the Shanghai asset management business, in addition to the two mutual fund joint ventures that concentrate on traditional equities and bond investment.

According to AMAC data, as of Thursday, the assets managed by UBS Asset Management Shanghai were valued at between 2 and 4 billion yuan ($276.27 million).

(Adapted from Reuters.com)