Shareholders at Lombarda China Fund Management in Shanghai have voted to remove Luca Frontini as CEO of the firm. The decision was effective from May 1 and LombardaÆs chief operating officer Wang Hua has stepped in as interim CEO for the next 90 days.

Questions surrounding the circumstances of FrontiniÆs departure remained unanswered by the time this story went to press.

FrontiniÆs sudden departure is a surprise to many in the industry as he was among the few recognisable western faces running a Chinese fund company. Prior to joining Lombarda, Frontini was an economist at the World Bank and a senior fund figure at Pioneer Investments. He is a graduate of John Hopkins University and London Business School.

Wang Hua, meanwhile, has over 15 years of experience in the industry having previously worked for Shanghai Aijian Trust, Wanguo Securities and Everbright Securities. He first moved into the funds industry by becoming a director of IT at Everbright Pramerica and later head of operations and IT at Citic-Prudential. Wang has a masters in economics from Fudan University.

Lombarda China was set up in July 2006 as a three-way joint venture between ItalyÆs Banca Lombarda e Piemontese (with 49% interest), ChinaÆs Guodu Securities (47%) and the Pingdingshan Coal Group (4%). It ranks 55 out of a total of 60 funds in the industry, with AUM of Rmb4.1 billion ($587.5 million) as of the latest quarter and a market share of 0.16%.

An industry source suggests Frontini may have been a victim of a clash between shareholders û a trend that is increasing within Sino-foreign joint ventures. Tensions between foreign and domestic owners were less common in the bull market but are growing as the funds industry in China experiences a drop in assets. The market shed 20% of its AUM in the latest quarter. It now has Rmb2.1 trillion ($30.09 billion) in AUM, or less than half of the total this time last year.

In an industry that runs on æguanxiÆ or business connections û from easing regulatory approvals and managing staff, to gaining shelf space from distributors û the source says Frontini may have been condemned for his lack of local language skills.

LombardaÆs strategy to position itself as a boutique fund house in a highly regulated and immature market was seen as particularly inappropriate given the limited investment tools available, according to a fund executive in Shenzhen.

ôAt the shareholder level, there has been a move towards what they think is æappropriateÆ senior management positioning,ö says Peter Alexander, principal at Z-Ben Advisors, making an observation on ChinaÆs fund JVs.

Alexander acknowledges that there have been differences in opinion between Lombarda and Guodu. However, with its minority position, Guodu would have to gain agreement from Pingdingshan to call for a change in senior management.

ôWith regards to success in China, there is a vast difference between control and influence,ö he adds. While the industry regulator dissuades fund players from vying for power, in reality foreign owners need to cultivate open communication channels and make compromises in order to succeed.

ôWe highly suggest to clients that are looking at coming into the market not to make any senior management appointments,ö he says.