China's mutual fund industry is undergoing a profound transformation. As of September 2025, the market hosts 165 fund management institutions overseeing a total of 36.74 trillion yuan in assets. However, the industry's "winner-takes-all" dynamic has intensified, with over half of these firms managing non-money market fund assets below 30 billion yuan.

The polarization is stark: industry leaders like E Fund and China Asset Management boast non-money fund assets of 1.81 trillion yuan and 1.52 trillion yuan respectively, while smaller players struggle to maintain relevance. Regulatory trends suggest potential mergers, restructuring, or bankruptcies among underperforming firms in 2026.

**Market Saturation: Licenses Lose Luster** The sector's oversupply has become undeniable. By October 2025, the number of fund products surged to 13,310 - 6.5 times the figure from a decade earlier. This glut has depressed valuations, exemplified by Qianhai United Fund's failed auctions, eventually selling for less than 40 million yuan after five attempts.

"Today, the critical factor isn't price but whether potential buyers possess adequate shareholder qualifications," noted an industry insider, highlighting the diminished value of once-coveted mutual fund licenses.

**Survival Divide: From Millions to Thousands** The revenue gap illustrates the industry's brutal stratification. China Asset Management reported daily revenues exceeding 23 million yuan in H1 2025, while smaller firms like Ruida Fund barely managed 10,000 yuan daily. Many small-scale managers face existential challenges:

- Exclusion from major distribution channels like banks and brokerages - Inability to fund ETF development or innovative products - Shrinking research capabilities due to inadequate management fees

HuaChen Future, operating for 13 years, manages just 370 million yuan in assets - averaging less than 30 million yuan in annual net growth.

**Niche Strategies Emerge** Amid this consolidation, some mid-sized firms are carving specialized niches:

1. **Bosera Fund**: Quantitative "Index+" products combining traditional multi-factor and AI-driven strategies 2. **AVIC Fund**: REITs (focusing on green energy, PV, logistics) and ESG-themed bond funds leveraging parent company expertise 3. **Penghua Fund**: Fixed income specialists with 200 billion yuan AUM, excelling in low-volatility bonds and innovative products like ultra-long duration bond ETFs 4. **Anxin Fund**: "Fixed income+" products 5. **Kunyu Fund**: Equity-focused strategies, with its flagship Yuanqi Fund delivering brand recognition after six years

The U.S. market offers a template, where giants like BlackRock and Vanguard coexist with specialists like PIMCO. China's industry is evolving from a "spindle" to "pyramid" structure:

- **Apex**: Integrated wealth managers (E Fund, ChinaAMC) - **Mid-tier**: Specialized medium-sized firms - **Base**: Niche-focused small players

Binah Capital Group Inc's framework categorizes global asset managers into four types - alpha boutiques, beta giants, distribution platforms, and solution specialists - offering guidance for China's differentiation.

**Outlook: Survival of the Fittest** The next 3-5 years will likely see accelerated consolidation. Firms lacking distinctive advantages or sustainable profitability face extinction. For smaller players, the only viable path is abandoning "all things to all people" ambitions to cultivate deep expertise in specific segments.

As one industry veteran observed: "In asset management, slower can be faster. While striving forward, restraint matters most." This restraint manifests in focusing on strengths rather than desperately patching weaknesses.

The question remains: Will 2026 bring the long-awaited wave of mergers and restructuring to China's overcrowded mutual fund landscape?