Net profit has declined for three consecutive years, China Merchants Fund is stepping out of its "comfort zone"

Ask AI · Can the new management team lead China Merchants Fund to turn around its profit decline?

Produced by | Damo Finance

As annual reports for listed banks and brokerages in 2025 move into a dense disclosure period, the annual operating performance reports of public mutual funds that are controlled or participate in by various financial institutions are also gradually coming to light.

As of April 1, more than 40 fund companies have disclosed their 2025 operating data. Among them, more than 70% of the companies with comparable data achieved year-on-year growth in net profit. The top 10 fund companies by net profit together recorded RMB 22.852 billion in net profit in 2025; compared with the same period last year, this represents an increase of about 12%.

Due to the continued recovery of market conditions in 2025, which drove both growth in fund performance and an expansion in assets under management, management fee income also increased. At the same time, when markets were at low levels, most fund companies used their own funds to subscribe to a considerable number of equity funds. Many products achieved doubled returns, helping fund companies’ operations “rise along with the tide.”

Among leading fund companies, China Merchants Fund’s operating performance is especially striking. In 2025, China Merchants Fund recorded operating revenue of RMB 5.47 billion, up 3.06% year on year; however, net profit attributable to shareholders fell 12.84% year on year to RMB 1.438 billion, making it the only fund company in the leading group with a double-digit decline.

As a bank-affiliated public fund backed by “the retail king,” China Merchants Bank, China Merchants Fund has unique channel resources. It also completed a top-level reshuffle in 2025, with both the chairman and general manager replaced, and has been fully pushing forward market-oriented reforms.

But based on operating results, the company has not yet fully escaped the development trend of slowing asset growth and profit pressure. The challenges it faces during its development are both normal manifestations of its own strategic adjustment period and reflect common issues faced by bank-affiliated public funds in the course of fee-rate reform and channel iteration.

Three consecutive declines in net profit

In terms of profitability, China Merchants Fund’s net profit in recent years has shown a persistent downward trend; it is not an accidental outcome caused by short-term market fluctuations.

China Merchants Fund once set a net profit peak of RMB 1.813 billion in 2022. But from 2023 to 2025, net profit continued to decline—RMB 1.753 billion, RMB 1.65 billion, and RMB 1.438 billion, respectively. This adjustment trend across three consecutive years is extremely rare among public fund institutions outside the top 20 by non-money-market scale, and it also reflects the company’s insufficient ability to maintain net profit stability.

In the same market environment, last year the net profit of Huaxia Fund, another bank-affiliated public fund, grew by more than 11% year on year. ICBC Credit Suisse, relying on a steady business layout, achieved a 42.5% year-on-year increase, highlighting its strong growth momentum. Even Bosera Fund—also part of the “China Merchants” ecosystem—saw net profit in 2025 reach RMB 1.531 billion, a marginal year-on-year increase of 0.21%, with its earnings stability slightly better than that of China Merchants Fund.

On the scale front, China Merchants Fund is also in an adjustment phase. As of the end of 2025, its management scale rose to RMB 977.2 billion, just one step away from reaching the trillion-yuan level. However, its non-money-market scale grew relatively slowly—about RMB 40 billion for the full year. Its ranking fell from No. 9 at the beginning of the year to No. 11.

The direct reason for the continued slide in profit lies in rigid compression on the cost side. As a typical bank-affiliated public fund, China Merchants Fund has long relied on the retail network layout of its parent, China Merchants Bank. In the early stages of industry development, this channel advantage provided strong support for the company’s scale expansion.

After the full implementation of the third phase of public fund fee-rate reform (sales expense reform), the subscription fee rate cap was significantly lowered, sharply reducing upfront distribution/agency income. But the bank channels’ trailing commission-sharing on existing assets was not reduced in parallel, directly squeezing profit margins that were already limited.

Structural imbalance, missing the ETF boom

If optimizing the cost structure is the short-term focus for profit adjustment, then achieving balanced development in product structure and advancing the rollout of ETF business are the key directions China Merchants Fund needs to break through in the long run. And behind this are its deep links to the “gene” and channel characteristics of bank-affiliated public funds.

In 2025, China Merchants Fund completed both the appointment of a new chairman and a new general manager. In May, Zhong WenYue took over as general manager, and in November, Wang Ying, Vice President of China Merchants Bank, officially became chairman. This reshuffle has been interpreted by the industry as an important signal of the company strengthening coordination with shareholders and accelerating its market-oriented transformation. For now, the effects of the transformation are still gradually being released and have not yet fully shown up in operating data.

Insufficient balance in product structure is one of China Merchants Fund’s main development shortcomings at present. As of the end of 2025, the combined scale of its bond funds and money market funds was about RMB 750 billion, accounting for 77% of its total assets under management. By contrast, stock funds and hybrid funds—representing active management capability—totaled less than RMB 2000 billion, accounting for roughly 20%.

This structure dominated by fixed income with equity as a supplement is not only a result of the “bank-affiliated public fund” gene, but also the root cause of its relatively thin profit margins.

Fixed-income products may be stable, but their fee rates are low and their profit margins are thin. Meanwhile, equity businesses with higher fee rates not only take up a low proportion, but also perform weakly. Among the company’s more than 100 active equity funds, only about 20 saw net inflows of fund shares in 2025. Of these, 7 were new products launched that year; incremental growth was largely supported by new products, while existing products generally experienced capital outflows.

As ETFs have become a core growth direction for the public fund industry in recent years, China Merchants Fund’s pace of ETF deployment has been relatively slow, which has also become an important factor affecting its scale and profit growth.

From 2023 to 2025, China’s ETF market entered a period of rapid growth. By the end of 2025, the total ETF scale across the whole market had exceeded RMB 6 trillion, becoming the world’s second-largest ETF market and also the core engine behind scale growth in the public fund industry.

But from the perspective of industry structure, bank-affiliated public funds as a whole have been relatively slow in their ETF deployment. The 16 bank-affiliated public fund companies together managed an ETF scale of only RMB 2450 billion, accounting for less than 4.3% of the total market. Although China Merchants Fund accelerated its ETF rollout in 2025 and added one-quarter of ETF categories within a year to catch up with industry pace, as of the end of 2025 its ETF scale was only RMB 845 billion. It had not yet entered the RMB 1 trillion club, lacked “blockbuster” products by scale, and was still in the investment stage, with the payoff effects not yet fully visible.

By contrast, giants such as Southern Fund, leveraging an on-exchange trading ecosystem and almost no trailing commission burden for ETFs, achieved both scale growth and profit growth, widening the gap with China Merchants Fund even further.

It is worth noting that China Merchants Fund’s current period of development adjustment is not a common issue shared by bank-affiliated public funds. Among similar institutions, many have also achieved growth against the trend. For example, ICBC Credit Suisse, relying on its fixed-income business base and a steady institutional business layout, saw its net profit grow by 42.5% year on year in 2025. Others, such as CCB Fund, by focusing on bond funds, money market funds, and institution-customized products, and leveraging institutional direct-sales or low-commission cooperation channel models, effectively controlled channel costs and protected the company’s core profitability base.

After China Merchants Fund completed its management change last year, it also proposed a strategy of “active management plus passive index” dual-wheel driving, trying to make up for shortfalls in both the equity and ETF segments. But for China Merchants Fund, which is accustomed to path dependence, market-oriented transformation is a long process. Whether it can reverse the trend of consecutive net profit declines remains something the market is waiting to see.