Hello and welcome to the Noah Holdings' 1Q 2022 Earnings Conference Call. All participants are in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Jingbo Wang, Chief Executive Officer. Please go ahead.

Jingbo Wang - Co-Founder and Chief Executive Officer

Okay. Thank you. [Foreign Speech] On the agenda of today's conference, I would like to talk about the macroview first and then report on the overall performance of Noah Holdings in the first quarter of 2022 and the developments of main business segments. Then let's invite our CFO, Mr. Qin Pan to introduce the quarterly financial information, followed by an interactive Q&A.

At the beginning of 2022, Noah and Noah's clients switched on a risk-off mode. Noah's clients, relationship managers, and investment managers may have never experienced a complete multifactor superposition cycle of continuous hikes in interest rates, credit expansion a.k.a quantitative easing, liquidity collapse, and massive excess credit. At the beginning of 2022, we realized that in the strong headwind, aviation will be a challenge. In the first quarter of 2022, we talked with relationship managers and clients repeatedly and emphasized that Noah was transformed when entering this theater, but many people were transformed when they came out.

In the first quarter of 2022, we suggested Noah's clients to re-examine the asset allocation of themselves and their families, actively rebalance the asset allocation and make the family asset allocation safer and more effective from the perspective of protection over growth. The ongoing war between Russia and Ukraine is worrying, but as a professional institution of growth management, we suggest that our clients should remain rational. Under this dilemma, the only certainty is that the market will continue to fluctuate. This market environment is not suitable for quotation mark, commit from managers and clients. Avoiding risks has become a better choice.

At the beginning of the New Year, Noah's strategic allocation strategy to clients is protection first, then grow. Since this a prime mortgage crisis since 2008, the global long-term quantitative easing policy and abundant liquidity have caused the huge inflation of risky assets. Asset inflation has penetrated into every corner of the world. The reversal of quantitative easing policy has come and the federal reserve in other countries have started multiple interest rate increase cycles. For asset prices, the shift from quantitative easing to quantitative tightening will be a challenging adjustment and the rapid withdrawal of liquidity will turn asset inflation into asset deflation.

In 2021, many industries in China were subject to stricter supervision and frequent policy changes, which led to fundamentally changes in the valuation logic of these industries and the market feels coded in the actual economic data. Our view is to delay questioning and judgment on China's economy. Quick judgment is a simple and partial cognition based on intuition, while delayed judgment corresponds to complex cognition. The problem of China's economy is obviously a complex problem, delayed judgment may be a wiser way.

On the whole, the direction of China is from paying attention to efficiency to paying attention to fairness, to encourage scientific and technological entrepreneurship, ensure the safety and controllability of key technologies, promote China's high quality economic development in the future, encourage social funds to enter more early science and technology funds, so as to solve the problem of being seized by the throat and independent innovation. From the perspective of investor asset allocation, allocating a certain portion of their capital to early science and technology funds is an inevitable choice to come back monetary easing and inflation.

In the first quarter of 2022, the theme word of asset allocation given by Noah CIO office is protection over growth. On the strategy implementation path, we suggested Noah's core clients start from the following four aspects. First, check the asset allocation of themselves and their families and pay attention to asset protection and asset segregation. Secondly, for the domestic public securities market, we recommend allocation to multi-strategy return funds, meaning from the perspective of protecting assets, reducing volatility and pursuing dividends. Finally, current equity investment fund is the main asset category to cross cycle and maintain growth for high net worth clients. We suggest a strategic allocation to science and technology and pay more attention to early industry funds, white horse funds, which have experiences to ride through cycles and special opportunity funds. From the perspective of long-term asset growth, such [Phonetic] asset side against the inevitable long-term monetary easing inflation by sacrificing liquidity.

I would like to emphasize that Noah and growth of asset management genes are private banks and our clients are high net worth individual clients. Therefore, our starting point is to understand client needs and take protecting the safety and profitability of the client's family assets as the starting point. The transformation from product-driven to client-centric has a far reaching impact on Noah's strategic choice and management model. Finance is a quick eco industry. In every financial crisis, large financial companies close down and their clients asset shrink significantly. As the operator of Noah, when we make some key fundamental decisions, the first criteria is to survive and not make mistakes. It is impossible to not make mistakes in investments and asset allocation, but we should reserve time and space for us to correct and tolerate them.

[Foreign Speech] In the first quarter of 2022 facing the extremely complex microenvironment, Noah adopted five core business strategies. First, completely reduced costs. Second, utilized multidimensional services and reached old clients as the main task as well as setup goals to recover lost clients and increased the wallet share of existing clients. Third, make every effort to develop new products to meet the protective needs of clients, and then post-pandemic needs. Fourth, maintain high productivity. Fifth, during the epidemic prevention and lockdown period, build good interpersonal relationships among clients, employees, suppliers, governments, and medical institutions.

In the first quarter, our operating costs fell sharply, down 33% year-on-year and 57% quarter-on-quarter. The operating margin reached 39.4%, down 1.6% year-on-year and a significant increase of 29% quarter-on-quarter. In 2022, the company still is the same as Noah's asset allocation strategies for clients and their families, which is protection over growth, client centric and survival as the bottom line. In this quarter, the GAAP net income attribute to shareholders was RMB310 million down 32% year-on-year and up 8% quarter-on-quarter, reaching 22% of the annual guidance. In the first quarter of 2022, Noah achieved a net revenue of RMB796 million, down 35% year-on-year and down 37% quarter-on-quarter.

[Foreign Speech] The total transaction value of the quarter was RMB15 billion, down 45% year-on-year and 29% quarter-on-quarter. Among them, it is worth mentioning that the private secondary funding in the standardized product category decreased by 69% year-on-year and 40% quarter-on-quarter, mainly due to our initiative to reduce the launch of such products amid market volatilities. The transaction value of private secondary products was RMB4 billion, mainly consisted of CTA strategy and reverse strategy. The transaction value of mutual funds was RMB7.1 billion, mainly monetary funds and interbank certificate of deposit funds.

For the mutual fund 2B business, we now offer more than 10,000 funds providing clients with a wider range of product choices. Small treasury now service more than 200 institutional clients in automobile, manufacturing, science and technology, as well as other industries. The transaction value of private equity funds was RMB3.2 billion, down 33% year-on-year and up 5% quarter-on-quarter.

In terms of international business, we adopted the same strategy to significantly reduce the product launch and allocation in the secondary market, focusing on the protective strategy and early primary market funds. The net income of the overseas sector was RMB190 million, down 44% year-on-year and 2.3% quarter-on-quarter, accounting for 24% of the group's total revenues. The overseas transaction value reached RMB2.4 billion, a year-on-year decrease of 35% and a quarter-on-quarter increase of 3%, accounting for 16% of the total transaction value of the group. The overseas AUM was RMB29.1 billion with a year-on-year increase of 12% and a quarter-on-quarter increase of 3%, accounting for 18% of the group's total AUM.

I would like to emphasize again that the decline in the transaction value and AUA of public securities in secondary market in the first quarter 2022 is a market behavior of Noah to protect client assets and actively adjust the product launch. In the fourth quarter of 2021 and the first quarter of 2022, Noah's core view is to reduce the secondary market product allocation and launch, increase the allocation of protective assets, and support the health inspection of client's family asset portfolios.

The strategic asset allocation strategy is protection over growth. Due to the impact of the new short-term regulatory policies, the transaction value of protective assets in the first quarter was RMB700 million, down 17% year-on-year and 40% quarter-on-quarter. We believe that the allocation scale of these assets will be improved in the second quarter. In the first quarter of 2022, Noah continue to appear to the strategy of promoting the stratified management of its clients, and a number of core clients, Diamond and Black Card, continue to grow to nearly 8,300, a record high. The number of Black Card and Diamond Card clients increased by 31% and 7.3% year-on-year ear respectively, together representing a 12% growth year-on-year.

In 2022, client growth is still one of the most important strategic investment in growth of Noah. At the same time, we have also established a project goal to recover lost clients and reactivate dormant clients, identify clients core demands and resolve their pain points. At the headquarters level, focused on the conversion of those clients from the standardization transformation and take multi-strategy funds as a stabilizer to meet client's demand of conservative assets.

[Foreign Speech] The net income of the asset management segment in the first quarter of 2022 was RMB200 million, down 26% year-on-year and down 27% quarter-on-quarter. Among them, one-time commission and performance-based income, both decreased while recurring service fees increased by 5% [Phonetic] year-on-year, reflecting the ability of long-term assets to bring sustainable income. Focused AUM increased slightly to RMB156.1 billion compared with the end of last year, of which private equity increased slightly to RMB132.7 billion compared with the end of last year. The AUM of public security is slightly reduced to RMB10.4 billion. The asset structure is healthy and in line with expectations.

In the first quarter. in view of the sharp price force of Chinese ADR, the war between Russia and Ukraine, Chinese domestic micro economy, and the prevention and lockdown of the epidemic in Shanghai, Gopher conducted a cash flow survey and net value evaluation of all primary market funds and its direct investment projects, adopted a more cautious and conservative investment strategy and strengthened exit management. Gopher's domestic early stage industry funded funds, special opportunity secondary funds and Gopher's US teams directly manage American Silicon Valley data funds, and American rental apartment realistic funds have performed well on the whole creating value for clients when market is volatile.

For public securities, by the end of the first quarter, Gopher's standardized products have also delivered robust investment performance. Among them, the annual return of Gopher mega channel manager of manager's funds was 10.7% exceeding the benchmark return rate by 9.7% in the same period. The annual return of top 30 funds was 11.1%, exceeding the benchmark yield by 4.5% in the same period. It is worth mentioning that all three types of funds of Gopher's stabilizer target strategy, active, balanced and stable, continued to outperform the relevant indices and amid market fluctuations in the first quarter. Since its establishment, the accumulated returns have been minus 2.1%, minus 1.6%, and minus 0.7% respectively and the pullback is far less than that of the CSI300 and CSI800 indices in the same period, effectively controlling fluctuations and pull back.

[Foreign Speech] Noah is headquartered in Shanghai. From the beginning of March, Shanghai has entered a stage from a network lockdown to a complete lockdown. From the start of the lockdown, Noah has established several epidemic crisis management project teams. The group management team is responsible for the overall management during the epidemic decision making on key matters, real time adjustment of strategies in response to the development of the epidemic. The epidemic situation assessment team will conduct real-time assessment of the epidemic situation development in various regions and provide insight input for the company's decision making. The epidemic communications team is in charge of HR and organizational development department to ensure that the latest policies of the company are conveyed to Noah's management team above level 18 in a transparent and timely matter.

The epidemic emergency response team formulates corresponding policies according to the external ecology, such as employees and clients, governments and public welfare, and in combination with the development degree of the academic and various regions, so as to minimize the impact of the epidemic on company. The post epidemic recovering team is composed of asset management, wealth management, and Noah international intelligence, CRO office, marketing team, and frontline Noah [Indecipherable] teams to work together to adjust the marketing strategy in real time, according to the development of the epidemic, identify opportunities of client's new needs and make full preparations for the growth after the epidemic.

In the past 40 days, Noah has delivered more than 500 trips of groceries and medicines to employees in Shanghai, provided medical treatment and support to infected employees, and delivered more than 1,200 trips of supplies to core clients and aged clients in Shanghai. At the same time, Noah has coordinated resources to meet client's medical needs and linked Gophers on the line portfolio companies to deliver various groceries and medicines to help clients, employees, and suppliers to go through this difficult period. In this process, Noah also provides psychological counseling courses for employees and clients, purchased various medical materials and donated them in batches to Shanghai health commission, hospitals, police stations, quarantine centers, community frontline and other places. There are more than 20 Noah employees who have been stationing in office in order to ensure the continuity of the company's business and have not returned home so far.

Noah's intentions, care for clients, employees and suppliers, and sense of responsibility for society have been widely praised. With professionalism and empathy, Noah is devoted to accompany clients from generations to generation.

[Foreign Speech] Before 2019, leading products are one of Noah's core competitiveness. From the second half of 2019, Noah has implemented a comprehensive transformation from product driven to client centric and survival as the bottom line. We certainly believe that only by sincerely taking clients at the center, keeping interest in line with clients and establishing the organization capacity of clients centricity, can we avoid being scale-centric, commission-centric and self-centric.

Noah has been engaged in the wealth management industry for nearly 18 years and has experienced many economic cycles. We deeply realize that wealth management requires strong ability to link with clients in addition to asset allocation strategy. In the past, the employees in China's wealth management industry were not all professional and the industry standard were unclear. Some places were full of [Indecipherable] that need less clients and some practitioners themselves cannot even understand it. Therefore, as practitioner of wealth management, we must have the high risk professional ethics, regarding the pursuit of true knowledge and wisdom as our moral responsibility and consciously putting them to all the positions that are determined and made by positions. We should really establish awareness of trustee responsibility, treat every penny given to us by clients as our parent's life savings, only then can we understand the trustee's responsibility.

Although in the first quarter of 2022, we barely encountered various challenges and pressures in the macroenvironment, it is precisely in the face of a difficulty beyond the combination of most people that Noah's deep link with our clients is further highlighted. The client activity of our online sharing has increased significantly with a number of live viewers under the Noah app increased by 98% year-on-year and the number of viewers increased by 210%. As small scale video conferences with clients in key cities became widely popular, relationship managers have been able to obtain more and deeper client touch senses than in the scenes than in the past. This is also the warmth embodiment of Noah brand. At the same time, relying on our healthy financial situations, we continue to make firm investments in client interface, brand image, and marketing in attracting excellent external talent and practice investing in the future in difficult times.

Now let's invite Mr. Qin Pan, CFO of the group, to introduce detailed financial performance of the quarter. Thank you.

Qin Pan - Chief Financial Officer

Thanks, Tanya, and thank you, Chairlady for [Indecipherable]. And hello to investors and analysts like Chairlady Wang has mentioned, the first quarter of 2022 has been a difficult one, amid lingering impacts of the COVID-19 pandemic, as well as uncertainties around the macro-environment, policy changes and geopolitical conflicts. These factors were reflected in the challenging capital marketing environment overall, with MSCI Overseas China down 23%, Shanghai Securities Composite Index down 11%,as well as NASDAQ and S&P500 down 9% and 5% in the first quarter, respectively.

The emergence of negative volatility has started to pressure the equity market since the second half of last year, translating into softened investor sentiment, evidenced by a decline of 74% year-over-year and 57% quarter-over-quarter decreasing new issuance of mutual funds during the first quarter of 2022. Nevertheless, Noah has managed to weather through these challenges with a client-centric mindset, continuing to enlarge our Black Card and Diamond Card client group, made noticeable progress in our client segmentation strategy, and also achieved 8% quarter-over-quarter increase in non-GAAP net income with disciplined OpEx management, while remaining committed to essential investments in client and market strategic initiatives.

Now, let me walk you through more detailed results of the first quarter. As a result of the lackluster performance in equity markets in the first quarter, as well as our adjustment in the secondary product distribution strategy, as mentioned by Chairlady, client's investment sentiment softened. As a result, one-time commission income was down on the back of the decrease in transaction value from RMB27 billion in '21 quarter one, the same period last year, to RMB15 billion in '22 quarter one.

Carrying income comparing to the first quarter of '21 record-setting quarter was also down due to the weak performance of equity market. As a result, overall net revenue were RMB796 million for the first quarter, down 35% year-over-year and 37% quarter-over-quarter. One-time commissions declined to RMB102 million due to lower transaction value amid challenging market conditions. The distribution of unsure life insurance products also slowed down during the quarter, as we made necessary adjustments, according to Rule 108 published by the China Banking Insurance Regulatory Commission in October 2021. Our team has managed to complete these adjustments in compliance with the new rule in the first quarter, and we have resumed distribution amongst our life insurance products to our clients, of which the financial impacts will be reflected in the second quarter results.

The stabilizing revenue stream, which is the recurring service fees remained stable at RMB484 million up 1.9% year-over-year, but still down 13.3% quarter-over-quarter, mainly due to NAV adjustments made to public security products. Performance-based income was RMB174 million, flat from the previous quarter. Transaction value was RMB15 billion for the quarter, down 45% year-over-year and 29% quarter-over-quarter due to a shift to risk-adverse sentiments among investors were faced with growing macro policy and geopolitical uncertainties. As a result, public security products, including private secondary products and mutual fund products, decreased by 34% from previous quarter.

As a wealth management firm and trusted advisor to our clients would believe that maintaining communications with our clients and guiding them through this challenging and volatile market is the utmost important task for us. I'm glad to say that we have done an excellent job in that regard. With enlarging our core client group, including our Black Card and Diamond Card clients, continues to be the foremost strategic initiative this year. We're happy to see a 12% year-over-year growth in this client group. More specifically, Black Card client and Diamond Card clients grew by 37% and 7% respectively from previous year, thanks to the implementation of a more targeted client segmentation strategy and operation enhancements carried out in key cities and regions.

Through our mutual fund platform, Smile Treasury platform, we also made substantial progress in acquiring and engaging corporate and institutional clients. The number of active corporate institutional clients increased by 33% from the previous quarter, and the mutual fund products that we allocate for corporate institutional clients increased by 88% year-over-year. Like Chairlady Wang mentioned, we believe there's large, but underserved market for treasury management service needs, among small and medium size enterprises, and we'll continue to explore this market segment with our staff solution platform, as well as leveraging our comprehensive line of product and well-established service network.

Income from operations were RMB314 million during the quarter, up 137% quarter-over-quarter, but down 38% year-over-year, as profit level in the first quarter of 2021 was largely benefited from a retro setting performance-based income. Operating margin was 39%, an improvement from 11% from previous quarter, due to lower compensation costs as well as stringent management on various OpEx and G&A expenses.

Compensation-related expenses were RMB358 million, down 39% year-over-year and 51% quarter-over-quarter, as relation managers' commissions increased or lowered transaction value. Investment income was RMB25 million, as we recorded a gain from our principal investment in iCapital Network, based on its fair value appreciation. Non-GAAP net income was RMB313 million, down 32% year-over-year but up 8% quarter-over-quarter.

As for our segmented results, net revenues from wealth management segment was RMB578 million, down 39% year-over-year and 40% quarter-over-quarter, due to a slowdown in transaction value during the quarter. Net revenues from asset management segment was RMB201 million, down 26% year-over-year and 27% quarter-over-quarter, due to lower performance-based income. Total AUM was RMB156 billion, flat from the end of last year, as the increase in PE AUM was largely offset by net adjustment in public security products and continued exits in real estate products.

Moving on to balance sheets, we remain in healthy liquidity position, as our current ratio stood at 2.6 times. The debt-to-asset ratio was 23% with no interest bearing debt on our book. By the end of first quarter, we had RMB3.9 billion in cash. Supported by a strong balance sheet, we were able to continue to provide high-quality services for our clients during this challenging macro condition and lingering impacts from the COVID-19 pandemic.

In light of the recent volatile environment, we published our first edition of Noah CIO report aligning our global macro insights and recommendation of our clients to adopt a protection first and growth strategy for 2022. With a more comprehensive and detailed solution strategy reports that follow through, our relation managers are better equipped with investment solution recommendations, catered to different market scenarios and client profiles when engaging with clients. Truly shifting from a product-driven model to a client-centric and solution-driven model, we look forward to pushing ahead our key strategic initiatives and continuing our investments in research capabilities to differentiate our solution-driven asset allocation services. We'll continue to progress on enlarging our institutional client base with the treasury service platform, and we believe this will also provide synergic opportunities for individual wealth management services in the years to come.

And thank you everyone for listening. I will now open the floor for questions. Operator?

Question & Answers

Operator

We will now begin the question-and-answer session. [Operator instructions] First question comes from Ethan Wang from CLSA. Please go ahead.

Ethan Wang - CLSA - Analyst

[Foreign Speech] I have two questions. The first is on the redemption of the asset management products. So we understand that in the first quarter, the whole industry is suffering from the product sales, but have we seen any sign of material redemption in the products, especially for different tiers of clients? That is my first question. And second question is on the fee level. Just want to check with management, while we're seeing the pressure on the fund sales, have we seen any pressure in the fund fee level when we negotiate with some management companies? Thank you.

Jingbo Wang - Co-Founder and Chief Executive Officer

[Foreign Speech].

Qin Pan - Chief Financial Officer

Okay. I'll translate briefly of what Chairlady has said and supplement some of my input. To your first question, Ethan I also thank you for asking about Shanghai, we're doing okay. And for your first question, I think it's actually a strategic reallocation between different strategies in terms of your question regarding whether or not there's large redemption. Since last quarter, we have been pushing forward the protection first kind of strategy for the client allocation strategy. So we did not see a huge outflow or pure outflow, net outflow, if you will, from one fund, but rather a reallocation probably between long-only sort of the funds that's shooting for alpha in the market, but to a more balanced type of products like the CPA and mutual strategy especially the multi-strategy kind of products. So we'll see some rebalancing between different strategies.

In terms of the fee pressure from the fund providers or fund managers, it really depends on, I guess, the performance of their funds. When they do see a large group of unhappy clients, they probably will experience some pressure on the fee wise. But in terms of the suppliers that we work with, we have not seen too much of a downward pressure in terms of the fee ratios on these funds, and we had actually started preparation for the shifting strategy of fund supplying, if you will, probably a couple of years ago, moving to more balanced portfolio, especially like the multi-strategy kind of products, and also started exiting from some of the funds, especially the loan-only funds and that is probably part of the reason that we achieved pretty high level of carry income in 2021. But in terms of fee pressure, especially how we negotiate with our fund suppliers, we haven't seen too much of a change unless the fund is really - performing really pretty. Ethan?

Ethan Wang - CLSA - Analyst

[Foreign Speech]. Thank you.

Operator

Thank you. Your next question comes from Emma Liu from Bank of America Securities. Please go ahead.

Emma Liu - Bank of America Securities - Analyst

[Foreign Speech] So I will briefly translate my questions. I have two questions. The first one is about your insurance sales. You said in first quarter your insurance sales was impacted by the regulation issued in October last year, but you already made some rectification and achieve recovery in the second quarter. So could you elaborate a little more, how the regulation impacts your insurance business, and how are you able to achieve the recovery in the second quarter?

And the second question is about COVID impacts on your business. Because we see there are more COVID lockdown in China since second quarter, so how will it impact your business, and you are still - and you still want to achieve your full year net profit guidance. And how do you - how are you planning to achieve this guidance, given the very tough first quarter already? Thank you.

Jingbo Wang - Co-Founder and Chief Executive Officer

[Foreign Speech]

Qin Pan - Chief Financial Officer

[Foreign Speech] The impact on the new insurance regulation was basically, there was a very abrupt cut-off on the compliance date, which is December 31, 2021, that the previous sale nationwide on the internet was not continuing to be allowed, as of January 1, 2022, and you have to obtain the license in certain cities to be able to actually make that sale. And at that time, we were actually in the middle of the application for that permit, and we obtained the permit actually in the first quarter of 2022. So it's basically the abrupt cut-off on the rule and regulation sort of caused a pause on the sale, especially for the first couple of months in the first quarter. And, once we have obtained that permission, I'll be able to do the sale starting from the second quarter. So the financial results will reflect on that. [Foreign Speech].

Jingbo Wang - Co-Founder and Chief Executive Officer

[Foreign Speech].

Qin Pan - Chief Financial Officer

So, Emma, basically a quick summary of what Chairlady has shared. Basically, I think a couple of reasons. One is that Shanghai is obviously more impacted than other cities, so nationwide we'll still be able to hold the client conferences, although at much smaller scale than in the past, but still be able to actually get in touch with clients. And, as you would mention that under - as you would imagine that under situations like this, the desire to connect with people actually becomes stronger, so the client actually interact with us on a more frequent basis.

And two is, we probably stay more prepared than competitors, if you will, especially from the product distribution, from the online sharing sessions, and especially on the diversity of products, as well as services that we'll be able to provide with the clients under different situations that we have primary, secondary, as well as all kinds of comprehensive services, especially the capability of placing overseas - our US dollar products for our clients to actually provide them with more options. So we believe obviously will bring negative impact on, I guess, on the market overall, but at the same time, it's also heightened, I guess, the need on, especially the anxiety on the uncertain macro situation. The client is actually more willing to listen to, one is more options in terms of allocation of assets and, two is they were looking forward to have more safety cushions, if you will, on their asset. So I guess obviously there is impact, but we also view that as the opportunity as we have a very strong balance sheet and also liquidity. This is the reason that we will continue to make investments in, client interface related as well as the city expansion in market share.

So in terms of the guidance, I think that's a very good question, but we're actually making our budget, on the basis, giving out guidance, which is already in the midst of first quarter. We actually anticipated, I guess, a challenging first quarter. So through the guidance of how we achieve the first level, we did put down our first quarter as probably the most challenging quarter, but still, I guess the situation was a little bit out of expectation. A couple of things, one is actually a citywide quarantine of Shanghai that was not forecasted, and two is really the process of the application for the insurance permit took a little bit longer than we expected. So we are probably a little bit behind of what we originally planned for the first quarter's profit, but its gap is more enough that we'll be able to catch up in the following quarters. Emma, did that answer your question.

Emma Liu - Bank of America Securities - Analyst

Thank you.

Qin Pan - Chief Financial Officer

Okay, thanks.

Operator

Thank you. Your next question comes from Yoyo Fan from CICC. Please go ahead.

Yoyo Fan - CICC - Analyst

[Foreign Speech] I will translate my questions. So thanks management for taking my question. I am Yoyo Fan from CICC. It's still very exciting to see the stable growth of our number of core clients. I have two questions here. The first question is regarding the fee business where management gave us more introduction on the progress of fee business like how much contribution does it have on our mutual transaction value or revenue and the second question is on the decrease of the number of relationship managers, what's the reason behind that?

Jingbo Wang - Co-Founder and Chief Executive Officer

[Foreign Speech] Thank you, Yoyo, for the question, and thanks for the support, by the way. In terms, we're both quarantined, I hope everything is - you and your family are doing okay. In terms of the Smile Treasury, which is the institutional version of our mutual fund platform, we have actually started the campaign officially in the first quarter and made obviously strategic initiatives and push for that. Reason being is that we're actually seeing a gap in that service that majority of our clients, probably 60%, 70% of our clients are entrepreneurs, and they have their own enterprises, which is they either lack experience to work with more market-oriented sort of treasurer management or money market type of funds, or they actually didn't have enough research ability to actually navigate through the mutual fund market. The reason being is that in the past the treasury function pretty much served by the banks products and as the banks products are also shifting towards the NAV-based products, it actually lacks the attraction in the past and the treasures are forced to actually to screen through thousands of sort of money market funds or mutual fund, and Noah is actually able to sort of transform the experience we have on a mutual fund researching capability, and also placing that with very conveniently designed staff-based solution for these institutions. So we actually use that as a strategic opportunity to actually expand this particular gap in terms of service in the market. As we understand it's not much similar products in the market and we're actually being able to actually make pretty good progress. We gained about 250 new clients in the very first quarter and seeing the latest data, this number is still accelerating. In terms of revenue contribution, it probably is going to take some while to shape up as it will accelerate, but at the same time the AUM obviously in treasury light funds doesn't contribute to a lot of revenue right away, but we're pretty confident to see that growth in the following few quarters. Yoyo, does that answer your first question?

Yoyo Fan - CICC - Analyst

[Foreign Speech].

Qin Pan - Chief Financial Officer

[Foreign Speech]

Jingbo Wang - Co-Founder and Chief Executive Officer

[Foreign Speech].

Qin Pan - Chief Financial Officer

Yoyo, so first question - first point is that we actually did shift from, I guess, immediately following the transformation in 2019. Obviously, the priority was to stabilize the team. So the strategy was to retain as much talent as we could. Then we started off - once the transformation has been completed in 2021, we started off our transformation in terms of talent from talent retention only to talent upgrading. So the mild change in number of wage managers is really the result of how we actually being screening the better RMs and we're trying to hire a lot more advanced or if you will, a lot more experienced and excellent ready managed through the talent roster, so it's really upgrading in the talent perspective.

And second point is also, we actually - it's interesting that we're seeing quite a bit of repay training clients, if you will, that during the so-called now standard type of product era some clients may probably go to another institution and at the same time actually brings with them the professional that serves with them. So now we're seeing quite a bit of repayment funds because, after all the transformation, as well as the market condition they continue to realize that Noah has been very transparent at the same time being pretty professional about our product selection and also product recommendation. So with the repatriation of this group of clients, we're also seeing the inflow of the relation managers.

Yoyo Fan - CICC - Analyst

[Foreign Speech] Thank you.

Qin Pan - Chief Financial Officer

[Foreign Speech].

Operator

Thank you. Your next question comes from Peter Yang from JP Morgan. Please go ahead.

Peter Yang - JP Morgan - Analyst

[Foreign Speech] Okay. Thanks for giving me the opportunity to ask this question. I wish to check with Wang and Qin, do we have more update on our Hong Kong-based team? Thank you.

Qin Pan - Chief Financial Officer

Thank you, Peter. Obviously with the pressure that's being placed on the Chinese PIs, especially the so-called pre-listing prices, Noah, similar as other Chinese PIs, have been exploring other necessary options. Hong Kong listing obviously is one of the pretty apparent decisions, but at this stage of time I'm just - I don't have any liberty to comment on that. Hopefully you understand, Peter.

Peter Yang - JP Morgan - Analyst

Thank you.

Qin Pan - Chief Financial Officer

Thanks, Peter.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to your speakers for closing remarks.

Qin Pan - Chief Financial Officer

Okay. Thank you. And thank you everyone for the investor and analyst, and thanks for your time. Bye, bye.

Operator

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Q1 2022

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