The spring of 2026 has arrived, but for the lower-tier players in China's public fund industry, the winter seems endless. While the A-share market experienced a recovery in 2025, with leading firms achieving substantial profits and ETF scales reaching new highs, small and medium-sized public fund companies have been largely excluded from this prosperity.
The "Matthew Effect" within the industry is intensifying in a stark manner: top firms report average daily revenues exceeding 23 million yuan, whereas尾部 institutions struggle with daily earnings of just 10,000 yuan. The recent executive change announcement by Zhongke Wotu Fund on February 10 highlights the harsh reality facing these smaller players. Governance disorders, shrinking scales, financial warnings, and product liquidations define their current predicament, signaling not just cyclical fluctuations but a survival contest.
Governance failures are evident in frequent executive turnovers and strategic discontinuities. For instance, Zhongke Wotu Fund saw its fourth general manager change in five years, leading to management instability and strategic shifts. By the end of 2025, its management scale plummeted to 75 million yuan, a nearly 75% year-on-year drop, ranking third from the bottom among 167 public fund firms. In 2024, the company was ordered to rectify operations due to non-compliance with financial regulations, exposing its fragile foundation.
Similarly, veteran firm New China Fund has faced governance chaos following changes in controlling shareholders, resulting in seven executive departures and appointments since 2023. Frequent leadership changes have hindered the formation of clear long-term strategies, trapping the company in a vicious cycle of declining performance and instability.
Scale challenges are manifested in liquidation waves and desperate "survival tactics." On February 6, 2026, New China Fund announced the liquidation of its New China CSI Dividend Low Volatility ETF, which had achieved a 21.07% return but failed to maintain a scale above 50 million yuan for 50 consecutive days. In the ETF arena, where scale is paramount, small firms lack the resources for costly system investments and liquidity maintenance.
Some firms resort to abnormal measures, such as Tongtai Fund, which saw its Tongtai Industry Upgrade Fund A report a 103.11% net value surge in H1 2025 due to large institutional redemptions, leaving it with a scale under 10,000 yuan and minimal holdings. To avoid liquidation, Tongtai Fund has repeatedly submitted solutions to regulators for its undersized products, undermining fiduciary duties.
Financially, scale erosion has breached the defenses of small funds. While top firms like China Asset Management generate daily revenues over 23 million yuan,尾部 players like Ruida Fund and Jiangxin Fund scrape by with 10,000 yuan daily, insufficient to cover operational costs. Even industry veteran Chen Jiwu, chairman of Kashi Fund, faced travel restrictions in 2025 over small debts, reflecting the severe crisis. Kashi Fund's scale dwindled to 117 million yuan by Q1 2025, with only three products remaining.
Shareholder support has become a last resort, as seen with Hongyi Yuanfang Fund's 29 million yuan capital injection in February 2026—its seventh in eight years. However, patience is finite, and prolonged losses may lead to shareholder exits.
Despite the challenges, differentiation offers a path forward. The future industry will likely feature "platform giants" coexisting with "boutique shops." Small firms must excel in niches, such as Xinyuan Fund's focus on fixed income, leveraging shareholder bank resources to reach a 100-billion-yuan scale. Those with industrial backgrounds can develop vertical industry funds, while quant-savvy teams can create Smart Beta tools. The acquisition of Pioneer Fund by Compass Group illustrates how new shareholders with fintech or internet traffic can inject vitality.
2026 marks a watershed moment. The era of relying solely on licenses or temporary measures to survive is over. More liquidations, executive departures, and company auctions are expected. For investors, choosing products from small and medium-sized funds now involves betting on governance integrity and survival capability.
Fund investments carry risks; caution is advised. This analysis is based on public information and aims for objectivity, but accuracy cannot be guaranteed. The content is for reference only and does not constitute investment advice.
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