Blair Pickerell, managing director and Asia CEO of Morgan Stanley Investment Management, has stepped down as chairman of Morgan Stanley Huaxin Fund Management -- a fund joint venture with Shenzhen-based Huaxin Securities -- nine months after the official opening of the fund house.

Wang Wenxue, chairman of Huaxin Securities since December 2000, will replace Pickerell as chairman of the JV. Wang was a director-level staffer with the People's Bank of China in Xian before joining the now defunct Xian brokerage house in 1993 (that brokerage had since been absorbed into Huaxin Securities).  

Pickerell says he will remain on the board of the fund JV even after he relinquishes his chairman title, and will stay actively involved.

The move marks the end to the fund house's initial transition period. Morgan Stanley still retains three seats on the board of the JV and is dominant over decisions related to product development and the management of the firm. 

The handover of the chairman title follows the sale of a 6% stake in the JV by Morgan Stanley International Holdings to Huaxin, which was completed in September last year. As the rules regulating China's JV universe state, one cannot be chairman without having majority ownership status.

Morgan Stanley was the largest shareholder of the fund JV at the time of its setup in June 2008, with a 40% stake acquired from Citic Guoan (35%) and Jutian Securities (5%). Huaxin, at that time, held a 30% stake acquired from Jutian Securities. Other shareholders at the time of the takeover included Hantang Securities (15%), Zhongda Group (5%) and China Merchants Finance Investment Holdings (10%).

 Zhongda has since sold its holdings to Shenzhen China Technology Industry Group. The fate of Hantang's holding is unclear, as the company has been de facto bankrupt since 2004 (legal proceedings and a restructuring are underway).

With a 36% stake, Huaxin Securities is currently the majority shareholder to the fund JV. Morgan Stanley's role has been changed to a minority with 34%. Pickerell says it is logical that the chairman seat should go to the firm's largest shareholder.

Market sources say Morgan Stanley's sale of the 6% stake in September last year was motivated by an expectation that it would receive formal regulatory approval for its link-up with Huaxin Securities in the brokerage business, as part of its plan to exit from its investments in CICC. That process remains locked in a regulatory stalemate although the two parties share a cooperative agreement signed in December 2007. However, had it happened, there could have been a danger that Morgan Stanley would have exceeded the maximum 49% that foreign shareholders can own in a fund management business.