Despite Covid-19, 2020 was a stellar year for China’s mutual fund industry, with assets under management (AUM) increasing 37.5% to RMB 19.7trn ($3trn) last year.
The increase in AUM was driven by new fund launches, with total fund initial public offering (IPO) volume jumping to RMB 3.2bn, which is more than double the size in 2019 and more than triple in 2018, according to a report from Boston-headquartered research firm Cerulli Associates.
Many of the new funds launched were also oversubscribed, and at least 100 new funds were sold out within one day after sales commenced, the report added.
The momentum carried on to 2021, as 122 new mutual funds were launched in January, raising close to RMB 500bn, and 28 new funds raised more than RMB45 billion on the first trading day after the Chinese New Year holiday.
The rise of “star asset managers” and their good track records is a key reason behind the growth of new funds, Cerulli said. The E Fund Competition Advantage Industries Mixed Fund A, for example, attracted RMB 237.4bn during its one-day IPO in January and surpassed the previous record set last year by more than RMB 100bn. The performance was boosted by the star manager of the fund, Feng Bo, whose best-performing fund achieved accumulated historical returns of 310.17%.
The increase of millennials becoming mutual fund investors has further elevated the status of star managers. Some idolize managers like Liu Gesong at GF Fund Management and E Fund Management’s Zhang Kun, who oversee active management fund AUM of RMB 84.3bn and RMB 76.4bn respectively, by dedicating them fan pages on Weibo, China’s social media platform like Twitter.
BUT SENTIMENT COOLS
However, the recent stock market slump in the country last month has brought losses to many mutual funds, cooling down market sentiment for new fundraising. In March, no new funds completed their IPO targets within a single day, compared to 39 in January and 20 in February.
Domestic fund managers remain positive about the industry, nevertheless, and believe new fund IPOs will pick up again once the stock market sentiment improves, according to the report. Some managers are even confident that “mega fund launches” will resume if the stock market turns bullish again.
“Although the dive in stock markets could make fundraising difficult, managers do not seem very worried,” the report said.
Some domestic firms told Cerulli that the market correction is an opportunity to educate small-ticket investors who have not experienced many market cycles.
“As long as the recovery does not take too long and a bear market is avoided, the long-term outlook for mutual fund IPOs should remain positive,” Ye Kangting, senior analyst at Cerulli, said in the report.
