UBS is planning to set up a wholly owned mutual fund business in China to expand its footprint in the country’s $3.9tn retail fund market, reported Reuters citing people with direct knowledge of the plan.

The asset management arm of the Swiss banking firm is said to be recruiting key personnel for the planned business, which it plans to launch in about two years.

UBS chief executive Ralph Hamers is optimistic about setting up new endeavours in China partly because of the success enjoyed by ING, the bank he previously headed, in the country, a source told the news agency.

At present, UBS’s China operations include a mutual fund joint venture and a private fund business.

The bank started the work to set up a new fund unit late last year after its attempts to take full ownership of its mutual fund joint venture failed.

UBS was forced to set up its own fund business after its Chinese partner in joint venture UBS SDIC Fund Management “made clear it won’t sell its stake”, according to a source.

UBS holds 49% of UBS SDIC Fund Management.

SDIC Taikang Trust, which owns the controlling stake in the venture, has approved UBS’s plans to launch a new Chinese mutual fund unit, a source said.

The Swiss bank’s talk with China Life to set up a joint asset management business was also not successful.

UBS, UBS SDIC, SDIC Taikang did not comment on the news.

UBS, this week, posted a smaller-than-expected quarterly profit as client activity at its wealth management and investment banking divisions stalled amid tough market conditions.