Assets in Chinese mutual funds sold under the Qualified Domestic Institutional Investor (QDII) scheme, which allow domestic investors to invest money outside mainland China, grew by 48.3% from December 2015 to December 2016, amounting to CNY87.3bn ($12.7bn), according to data from Morningstar.
The QDII programme was launched in 2006. While the assets in QDII funds equal only 1.1% of funds available to domestic investors in 2016 (up from 0.77% in 2015), in China’s tightly controlled capital market, they provide a rare avenue for Chinese investors to invest abroad.
QDII quota are assigned by the State Administration of Foreign Exchange. It stopped issuing new quota in March 2015 due to concern over capital outflows.
Fixed income funds dominated the growth of investment in Chinese QDII funds. They recorded 412% growth, while equity mutual funds grew by 24%.
(The growing demand for fixed income funds is also visible in the domestic fund market, where fixed income AUM doubled during the year).
Fixed income funds now account for 23% of assets in QDII funds, up from 7% a year before, while the share of assets in equity funds declined from 48% to 40% during the year.
Assets in QDII mutual funds
Source: Morningstar
Top fixed income flows
The China Southern Asian Dollar Income Bond QDII Fund was launched on 3 March 2016.
At the end of 2016, it accumulated the most QDII fixed income fund assets totalling CNY4.3bn ($620m). At the end of 2016, the fund had about 21% market share in its category, which is comprised of 16 funds.
The Bosera Asian Bond QDII Fund, with CNY2.13bn ($310m) of assets in December 2016, dominated the market for most of the past three years. It experienced a flat AUM in 2016, ending the year with CNY24.7m ($3.6m). It currently has a 10.7% market share.
The Penghua Global High Yield Bond QDII Fund has been an unremarkable fund for most of the past three years. In 2016, it recorded high inflows in the second quarter and held CNY2.15bn ($310m) in assets in December. The fund has a 10.8% share of the market.
Returns of the top three fixed income QDII funds*
| Fund | 3M return | 6M return | 1Y return | 3Y return (ann.) |
| Bosera Asian Bond Fund QDII RMB | 2.33% | 1.90% | 9.10% | 7.46% |
| China Southern Asia Dollar Income Bond QDII USD | 1.70% | 0.50% | ||
| Penghua Global High Yield Bond QDII | 3.29% | 2.33% | 11.12% | 8.12% |
*Data to 28 February 2017. Percentage based on US dollar return. Source: Morningstar
