The regulator approved the first batch of six FoFs in September this year, which raised a total of RMB 16.6bn ($2.5bn) in assets during their initial public offerings.
The six FoFs are managed by China Southern Fund Management, Manulife Teda Fund Management, Harvest Fund Management, CCB Principal Asset Management, HFT Investment Management and China Asset Management.
In total, 49 fund managers have submitted 86 FoFs applications to the CSRC, according to the report. The largest number of applications came from China Asset Management Company and China Universal Asset Management Company, with four applications each.
China AMC, which partnered with Russell Investments in December, became the first domestic manager to target the FoF business. Under the agreement, Russell provides advice to China AMC on the design of its domestic FoF investment products, according to the report.
China AMC’s JuHui FoF raised RMB 4.7bn during its IPO, which is the highest among the six approved FoFs. A total of 107,276 investors subscribed to the product in just 13 days.
The China Southern All Weather Strategy FoF was second with RMB 3.3bn raised. It is managed by China Southern Fund Management.
MRF funds to benefit
Hong Kong-domiciled funds that are sold in the mainland via the Hong Kong-China Mutual Recognition of Funds (MRF) scheme are said to benefit from FoF investments.
According to FoF guidelines, a retail FoF is a public fund that invests more than 80% of its assets in other CSRC-approved funds, but cannot invest more than 20% of its assets in one single fund.
Citing an unnamed fund manager, the Cerulli report said that northbound funds on the MRF scheme are considered CSRC-approved, and therefore are eligible to receive investments from FoFs.
Asset flows into Hong Kong-domiciled MRF funds have been disappointing since the scheme kicked off. One fund, the JP Morgan’s Asian Total Return Bond Fund, accounts for at least 90% of total gross sales of northbound funds in China, according to the report.
Cerulli attributes weak brand awareness among retail investors for sluggish flows. However, northbound funds could receive recognition and demand in the future from FoF managers amid scarce Qualified Domestic Institutional Investor (QDII) quota, it added.
The QDII scheme provides quota for onshore investors to invest offshore. However, the State Administration for Foreign Exchange (SAFE) stopped issuing new QDII quota in March 2015 due to concern over capital outflows and the subsequent effect on the RMB currency.
