Fidelity to start layoffs in China

Fidelity International Limited (FIL) is reportedly initiating layoffs at its primary China division, aligning with a broader global downsizing effort, as reported by Reuters on Tuesday.

Sources indicate that approximately 20 employees, or 16 per cent of the current workforce, are affected by this decision. This move comes amidst a challenging economic climate in China, marked by a decline in market performance and investor confidence.

FIL, a prominent asset management firm overseeing $776 billion in client assets, has launched a cost-saving initiative expected to yield $125 million in savings for 2024 and result in a 9 per cent reduction in its global workforce.

While specifics regarding the China unit’s layoffs remain under review, the spokesperson for FIL has confirmed that no final decisions have been made.

The financial landscape in China has been turbulent, with the CSI300 index experiencing a nearly 9 per cent drop over the past year, reaching a five-year low. This instability has led other financial institutions, such as Morgan Stanley and Matthews International Capital Management, to also reduce their presence in China.

Despite these challenges, FIL’s China unit, which received regulatory approval to operate in the country’s $3.7 trillion mutual fund sector in late 2022, manages three funds totaling 6.7 billion yuan ($931 million) in assets.

While FIL’s inaugural equity fund has underperformed since its launch in April 2023, the company’s bond funds have shown promising results against benchmarks.

The mutual fund industry in China is expansive, with over 150 companies, including global players like BlackRock, Schroders, and JPMorgan Asset Management.

Since 2019, foreign firms have been allowed to establish wholly-owned local entities, a policy that FIL, formerly associated with Fidelity Investments, has taken advantage of to expand its international footprint.