Orient Fund has appointed Yang Shucai from its major shareholder as chairman to replace Li Weixiong following a highly public internal dispute.
Li had run the fund from June 2001, but on expiration of his term, he stepped down in August 2010. Yang was president and vice-chairman of Northeast Securities, which has a 46% shareholding in Orient Fund.
The management changeover follows an internal dispute aired publicly through leaked minutes of a meeting circulated on mainland China websites.
The instability that the drama has caused the company serves as the latest example of the need for Chinese asset management firms to improve corporate governance.
Conflict among Orient Fund’s senior management team has reportedly festered since February last year when Fu Yong, its star fund manager and founding member, left to join rival firm Changxin Asset Management. AsianInvestor tried to contact Fu but was told he is travelling.
Having joined an Orient preparation team in January 2002, Fu helped to establish the FMC in 2004 and managed a flagship fund, building the brand name from scratch. He rose to the position of vice-general manager and chief of the investment committee in February 2007.
By the end of 2009, Fu’s hybrid Orient Select fund had recorded a 360% return since inception in 2005. By the time Fu left, Orient Select accounted for about 80% of Orient’s overall AUM.
It has been reported that the arrival of new general manager Shan Yu in August 2009 resulted in a challenge to Fu’s power within the company.
According to minutes of an Orient board meeting in February last year, Shan reshuffled the management team in September 2009 without calling a meeting and appointed a prospective fund manager as vice-chief of the investment committee before he had started his employment.
Two months later, Fu tendered his resignation and joined Changxin Asset Management. It is understood that Li, the then-chairman, subsequently questioned Shan’s management style. The above board meeting was called to address the issues.
Independent director Song Donglin, an economics professor at Jilin University, subsequently voiced his concern that the company could not reduce staff turnover without first tackling deep-rooted problems related to company management, systems and regulation.
Since Fu's exit, Orient Select's performance has been below par, recording -1% in 2010 even as the benchmark rose 3%; by contrast, its return in 2009 was 100%, compared with 40% for the benchmark. The company didn’t launch any funds last year.
There have also been some major changes within the board of directors in the past 12 months, with the names of Li, a director and three independent directors no longer listed.
A spokesperson for Hai Tang PR agency, which represents Orient Fund, declined to comment or offer any explanation for these events when contacted by AsianInvestor.
Such spats appear to be commonplace in China. In 2007, fund manager Lv Jun left Sitico JP Morgan to establish his own private fund following an internal conflict; and in 2010, Lu Jinhai, general manager of Baoyin FMC, stepped down, swiftly followed by several portfolio managers and a drop in performance.