QDII funds bleed $1.59bn in outflows in 2018

Data

QDII funds, which mainland firms use to invest onshore capital outside of China, still account for less than 1% of China’s RMB 11trn mutual fund market, according to data from Morningstar Direct.

The qualified domestic institutional investor (QDII) scheme enables domestic fund managers to invest onshore capital outside of China.

Chinese regulators revived the QDII programme in April last year after a three-year halt to quota issuance. However, money has continued to flow out of QDII products.

The funds saw net outflows of RMB 10.76bn ($1.59bn) in 2018, according to Morningstar, with global bond funds leading the outflows at RMB 6bn.

QDII inflows/(outflows) (RMB m)

Name

2018

Q4 2018

China Fund QDII US Equity

2,134

(911)

China Fund QDII Commodities

490

217

China Fund QDII Emerging Markets Equity

(21)

(4)

China Fund QDII Other

(26)

(6)

China Fund QDII Emerging Markets Allocation

(27)

(2)

China Fund QDII Greater China Allocation

(129)

(55)

China Fund QDII Asia-Pacific ex-Japan Equity

(336)

(53)

China Fund QDII Asia Allocation

(512)

(52)

China Fund QDII Greater China Equity

(1,156)

(261)

China Fund QDII Sector Equity

(1,401)

155

China Fund QDII Global Equity

(1,592)

(187)

China Fund QDII Global Allocation

(2,106)

(999)

China Fund QDII Global Bond

(6,076)

(1,864)

Total

(10,759)

(4,023)

Source: Morningstar

The only categories that saw net inflows are US equities and commodities. However, the appetite for US equity QDII products slowed in the fourth quarter, when the category saw net outflows of around RMB 911m.

Despite huge outflows in global bond and equity funds, they continue to have the largest share of the QDII market, with total assets of RMB 10bn each.

The QDII market remains small in the industry, accounting for just RMB 62bn or 0.56% of China’s RMB 11trn mutual fund market, according to Morningstar.

Money market stalwart

Overall, money market funds, which account for 67% (RMB 7trn) of China’s mutual fund industry, continue to be the most popular product category in 2018, according to Morningstar.

Top 10 categories with largest net inflows in 2018 (RMB m)

Name 2018 Q4 2018
China Fund Money Market Funds527,824(713,403)
China Fund Short-Term Bond Fund244,839(66,024)
China Fund Pure Bond112,024120,047
China Fund Normal Bond Fund71,54064,860
China Fund Equity Funds50,15721,699
China Fund Aggressive Allocation Fund24,7944,134
China Fund Moderate Allocation Fund7,604224
China Fund Shanghai-Hong Kong-Shenzhen Equity3,260(1,224)
China Fund Sector Equity Health3,208677
China Fund QDII US Equity2,134(911)
Source: Morningstar

In spite of the declining yields in money market funds, partly due to tightened regulations on liquidity and risk management, investors continued to pour money into these safehaven products due to the economic and stock market downturn, according to a recent Cerulli report.

Bond funds also saw huge net inflows during the year, unlike other markets such as Hong Kong, Singapore and Thailand, according to Morningstar data.

Chinese equity and mixed-asset funds, particularly aggressive and moderate allocation products, were also among the categories that saw the highest net inflows. However, not all mixed-asset categories saw positive flows. Flexible and conservative allocation funds were among the top 10 categories with largest net outflows in 2018.

Top 10 categories with largest net outflows in 2018 (RMB m)

Name 2018 Q4 2018
China Fund Flexible Allocation Fund(319,825)(20,337)
China Fund Guaranteed Funds(30,882)(2,201)
China Fund Aggressive Bond Fund(27,873)(2,113)
China Fund Conservative Allocation Fund(19,599)(1,881)
China Fund QDII Global Bond(6,076)(1,864)
China Fund QDII Global Allocation(2,106)(999)
China Fund QDII Global Equity(1,592)(187)
China Fund QDII Sector Equity(1,401)155
China Fund QDII Greater China Equity(1,156)(261)
Source: Morningstar

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