Around 420 new funds were introduced in China during the third quarter, raising close to $180bn in IPO assets, according to data from Broadridge Financial.
This was a new record for quarterly new fund sales in the country, with the new inflows pushing industry assets to a new high of at least $2.5trn by the end of September, up by 9% from the previous quarter.
Mixed-asset funds swept the top three spots among the quarter’s best-selling sectors, led by dynamic mixed asset products (at least 70% of their assets in equities) with $64bn in net inflows, followed by asset allocation funds (no asset allocation restrictions) and conservative mixed-asset funds (at least 70% of their assets in bonds) at $18bn each.
“Amid the rising stock market, Chinese investors purchased more equity and mixed-asset products, particularly new launches, while continuing to pull money out of short-term bond funds and money market funds due to declining yields,” Yoon Ng, Broadridge’s senior director for Apac insights, said in a report.
Ng added that mixed-asset funds were preferred over pure equity products as investors want the downside protection offered by fixed income.
STAR MANAGER PHENOMENON
The firm also noted that several new mixed-asset fund launches were oversubscribed multiple times across all major distribution channels and China and sold out within a day due to huge demand.
Out of the total $180bn raised by new funds, slightly more than one-fifth was contributed by some 15 fund launches that were hailed as blockbuster funds promoted by star managers.
“The star manager phenomenon has prompted many retail investors in China to move away from their ‘do-it-yourself’ investment approaches to seek more professional asset management services,” Ng said.
OUTBOUND SALES UP
Separately, Broadridge added that outbound funds net flows bounced back from small withdrawals in the second quarter to reach $1.9bn in the third quarter, with at least 70% coming from a single fund lunch. The China GF HKG Stock Connect Growth Selected Equity Fund, launched in September, raised $4.1bn from around 160,000 individual fund buyers.
“The successful launch of this fund reflected the growing appeal of Hong Kong-listed stocks to mainland investors,” the report said.
The third quarter also saw strong inbound fund net flows across all three months, totalling $14.5bn. Active strategies accounted for more than 70% of the total.
“Global investors flocked to Chinese bonds for higher yields and safety, further supported by strong appreciation in the renminbi and the inclusion of Chinese bonds in FTSE Russell’s flagship World Government Bond Index,” Ng said.