New fund launches in China continue to face a cooling market sentiment this month, with two asset managers announcing this month they could not complete their fund launches, and a slew of others extending their subscription period in an effort to attract more inflows.
The trend started in March, when no new funds completed their IPO targets within a single day, compared to 39 in January and 20 and February, according to data from Cerulli Associates.
Caitong Fund Management announced earlier this month that it failed to launch its Caitong Fengyi 12-month Mix Securities Investment Fund, even after an extended 89-day subscription period. The fundraising started on 4 January and was due to expire 18 days later. But the company announced before the expiration date that the subscription period would be extended by 70 days to 2 April. When the final deadline came though, the firm announced that it “failed to meet the requirements” of launching the fund.
According to the fund’s initial filings, to successfully launch the fund, it needs to attract at least RMB 200m ($31m) of subscriptions from at least 200 investors.
JT Asset Management also announced on April 2 that its Jiutai Yingfeng Quantitative Multi-strategy Mix Securities Investment Fund had failed to meet the requirements of fund launch.
So far, from the beginning of March to 11 April, 66 equity funds have extended the offering period, according to a report from state-owned-media Shanghai Securities News. In addition, the subscription days for three ETF funds have been extended to more than 90 days.
For example, the Ping An CSI New Materials ETF originally only offered an 11-day subscription period between 6 – 16 April, with the last two days available for online subscription. The firm then stretched that deadline by another 80 days to 5 July, with the online subscription also extended to five days, according to a statement from the firm last week.
“The recent cooling-down of fund launches is mainly due to poor investor sentiment after stock market correction in the first quarter of 2021,” Ye Kangting, senior analyst at Cerulli Associates, told FSA.
This posed stark contrast with 2020, a stellar year for new fund launches in China, with total fund initial public offering volume jumping to RMB 3.2bn, more than doubling the size in 2019, according to Cerulli data.
“In 2020, many mutual funds have delivered decent returns amid bullish stock market performance, which encouraged investors to purchase new funds managed by well-known managers, and those new net inflows contributed again to the stock rise,” Ye explained. “Market slump this year has made investors more risk-averse in subscribing to new funds.”
Ye remains confident that the long-term prospect for new funds in China is positive.
“The general trend will continue until the capital market turns better,” she said. “The fact that some fund houses cancelled or extended fund launches is reasonable, as they could be waiting for some good market time to launch product in order to gain larger initial AUM.”
