Short-term bond funds, which China puts in the category of cash management products, almost doubled assets during the first half of 2018. Total AUM of the funds available for sale in the mainland rose to RMB692.47bn ($101.37bn) from RMB354.38bn in six months, Morningstar data shows.
China’s securities regulator has been watching, and this month issued guidance to domestic fund firms, local media reported. The regulator expressed concern over the fast growth of assets and urged fund houses to reduce the asset size of their funds by 20% every six months.
The regulator also warned fund managers to be mindful of liquidity risks and to take precautionary measures to avoid triggering investor panic.
‘Cash management’ driver
During the first half, onshore funds altogether grew 8.88% in assets. The major drivers were the so-called cash management products, which are money market funds and short-term bond funds.
Excluding MMFs and short-term bond products, total AUM was -7.8%, according to Morningstar data.
China’s AUM by category
| Category |
AUM (RMB) |
Market share |
| Equity |
414.14bn |
3.72% |
| Bond |
887.83bn |
7.98% |
| Allocation (mixed assets) |
1.49trn |
13.38% |
| Money market fund |
7.43trn |
66.82% |
| Short-term bond fund |
692.37bn |
6.23% |
| QDII fund |
98.48bn |
0.89% |
Source: Morningstar
Similar to MMFs, short-term bond funds mainly allocate to short-dated borrowing instruments, such as negotiable certificates of deposit (NCDs). They are primarily issued by the smaller-scale banks, which can be impacted by a tightening of liquidity in the market.
In fact, the regulator has attempted to slow the rapid expansion of money market funds by limiting the daily maximum subscription and maximum individual investment of the world’s biggest MMF, Yuebao. This year, China’s regulator also instructed external research and rating firms to exclude money market fund assets when ranking asset management firms.
Of the top 20 onshore firms, 11 of them are foreign joint ventures and the rest are domestic, Morningstar data shows.
The three biggest asset gainers so far are sino-foreign joint ventures Everbright Pramerica, BOCOM Schroders and Minsheng Royal. Their assets are up more than 50% each.
In particular, Everbright Pramerica, a joint venture between China’s Everbright Securities and Newark-based asset manager Prudential Financial, ranked first in terms of AUM increase with a 58.6% growth.
Top 20 Chinese asset managers by AUM (excluding MMF)
| Firm | JV partner |
RMB bn |
1H Change |
| E Fund | – |
241.51 |
-0.67% |
| GF Fund | – |
210.23 |
22.06% |
| Harvest | DWS (30%) |
176.73 |
-10.40% |
| China Universal | – |
176.65 |
20.76% |
| ChinaAMC | Power Corporation of Canada (27.8%) |
163.50 |
-10.98% |
| Bosera | – |
161.17 |
-1.95% |
| Southern | – |
145.51 |
-21.44% |
| BOC | Blackrock (16.5%) |
130.97 |
27.39% |
| China Merchants Fund | – |
103.46 |
-27.37% |
| ICBC Credit Suisse | Credit Suisse (20%) |
102.60 |
12.02% |
| Bank of Communications Schroders | Schroders (30%) |
91.42 |
56.14% |
| Da Cheng | – |
85.60 |
29.52% |
| CCB Principal | Principal Global Investors (25%) |
83.89 |
20.29% |
| Fullgoal | BMO Bank of Montreal (27.8%) |
81.69 |
13.84% |
| Huaan | – |
77.32 |
7.22% |
| Yinhua | – |
71.66 |
24.68% |
| Guotai | Generali (30%) |
67.54 |
-9.97% |
| Everbright Pramerica | Prudential (49%) |
65.08 |
58.61% |
| Minsheng Royal | Royal Bank of Canada (30%) |
62.63 |
51.61% |
| Penghua | Eurizon Capital (49%) |
62.90 |
-0.58% |
