Zhong Ou Asset Management (Zhong Ou; ) is a Chinese

asset management company An asset management company is an asset management / investment management company/firm that invests the pooled funds of retail investors in securities in line with the stated investment objectives. For a fee, the company/firm provides more dive ...

founded in 2006. It is headquartered in

Shanghai Shanghai, Shanghainese: , Standard Chinese pronunciation: is a direct-administered municipality and the most populous urban area in China. The city is located on the Chinese shoreline on the southern estuary of the Yangtze River, with the ...

, China.

Background

The company was originally founded in July 2006 as Lombarda China Fund Management, a three-way

joint venture A joint venture (JV) is a business entity created by two or more parties, generally characterized by shared ownership, shared returns and risks, and shared governance. Companies typically pursue joint ventures for one of four reasons: to acce ...

(JV) between Banca Lombarda e Piemontese (49%), Guodu Securities (47%) and Pingdingshan Coal Group (4%). According to Luca Frontini who was then-CEO of Lombarda China, the decision was made as Banca Lombarda was looking for the next growth opportunity and wanted to have more international presence. The deal took only nine months. In May 2008, Lombarda China shareholders voted to remove Frontini as CEO. His departure came as a surprise to many as he was among the few recognizable foreigners running a Chinese fund house. An industry source suggested Frontini may have been a victim of a clash between shareholders due to a trend of increasing tensions between foreign and domestic owners of Sino-foreign joint ventures. While tensions were less common during bull markets, due to the

2008 financial crisis The 2008 financial crisis, also known as the global financial crisis (GFC), was a major worldwide financial crisis centered in the United States. The causes of the 2008 crisis included excessive speculation on housing values by both homeowners ...

, the company at the time had experienced a decline of 20% of its

assets under management In finance, assets under management (AUM), sometimes called fund under management, refers to the total market value of all financial assets that a financial institution—such as a mutual fund, venture capital firm, or depository institutio ...

in the latest quarter. Another source stated that Frontini might have been condemned due to lack of local language skills. Lombarda China's strategy as a boutique fund house in a highly regulated and immature market was seen as inappropriate especially given the limited investment tools available. The shareholders were making moves towards what they thought was appropriate senior management positioning. Wang Hua stepped in as interim CEO. Later on Lombarda China was rebranded to Zhong Ou Asset Management. In 2014, Zhong Ou claimed to be the first fund house in China that allowed members of the management team to hold an ownership stake. In July 2017,

UBI Banca Unione di Banche Italiane S.p.A., commonly known for its trading name UBI Banca, was an Italian banking group, the fifth largest in Italy by number of branches. It was formed on 1 April 2007 from the merger of the Banche Popolari Unite (trading ...

(formed from Banca Lombarda) transferred 10% of its 35% stake in Zhou Ou to Zhong Ou's management team. As a result, it was no longer the largest shareholder of the fund house as the management team now owned 32%. In April 2023,

Warburg Pincus Warburg Pincus LLC is a global private equity firm, headquartered in New York City, with offices in the United States, Europe, Brazil, China, Southeast Asia and India. Warburg has been a private equity investor since 1966. As of April 2024 the f ...

obtained approval from the

China Securities Regulatory Commission The China Securities Regulatory Commission (CSRC) is a government agency directly under the State Council of the People's Republic of China. It is the main regulator of the securities industry in China. History Indicative of the role of the C ...

(CSRC) to acquire a 23.3% stake of Zhong Ou from

Intesa Sanpaolo Intesa Sanpaolo Società per azioni, S.p.A. is an Italian international banking group. It is Italy's largest bank by total assets and the world's 27th largest. It was formed through the merger of Banca Intesa and Sanpaolo IMI in 2007, but has a ...

(who acquired UBI Banca). This came at a time where foreign financial institutions were seeking increase their investments in local fund houses to get more exposure to China

mutual fund A mutual fund is an investment fund that pools money from many investors to purchase Security (finance), securities. The term is typically used in the United States, Canada, and India, while similar structures across the globe include the SICAV in ...

market.

Regulatory issues

In June 2011, Xu Chunmao, a former vice president at Lombarda China was put in police custody for investigation after he was found to be involved with

insider trading Insider trading is the trading of a public company's stock or other securities (such as bonds or stock options) based on material, nonpublic information about the company. In various countries, some kinds of trading based on insider informati ...

. The Shanghai Asset Management Association stated Xu used the tactic of

front running Front running, also known as tailgating, is the practice of entering into an equity (stock) trade, option, futures contract, derivative, or security-based swap to capitalize on advance, nonpublic knowledge of a large ("block") pending transactio ...

during his tenure at Everbright Pramerica Fund Management between 2006 and 2010. Xu joined Lombarda China in May 2010 before the CSRC launched a probe into suspicious trades by him. At the time, Xu was the most senior manager in China's asset management sector to be convicted of insider trading.

References

External links

* {{Major asset management companies 2006 establishments in China Financial services companies of China Financial services companies established in 2006 Investment management companies of China Warburg Pincus companies Asset management companies