China’s mutual funds industry sees 2011 assets plunge

China’s mutual funds industry saw its assets under management shrink 12.5% last year despite a plethora of new fund launches and the establishment of six fund management companies.

Industry assets totalled Rmb2.17 trillion ($344 billion) at the end of 2011, from Rmb2.48 trillion the year before. There are now 914 mutual funds managed by 66 FMCs, according to TX Investment Consulting. Three new FMCs that started last year have yet to launch any funds.

Fund performance on both the equity and fixed income sides was negative for the year as the CSI 300 index sank 26%, while a poorly performing domestic bond market heaped additional pressure on fixed income and balanced funds. On average, fixed income funds dropped 9% in 2011, while equity funds recorded a loss of 25%.

Data from the Howbuy fund research centre shows that, as of the end of 2011, there were 434 equity funds with a total of Rmb993.6 billion in AUM, compared with 327 equity funds with Rmb1.2 trillion in 2010.

Over the same period, total AUM for balanced funds also fell to Rmb548.4 billion across 176 funds, compared with Rmb741.4 billion from 167 funds the previous year.

Bosera Value Appreciation Fund achieved the ironic title of best performing among equity and balanced products last year with a loss of -7.9%.

Qualified domestic institutional investor (QDII) funds also failed to turn their luck around in 2011. Although the number of funds almost doubled, from 28 in 2010 to 51 by the end of last year, total AUM shrank from Rmb72.9 billion to Rmb58.1 billion.

By contrast, conservative fund products attracted more interest as investors became more risk averse. The total AUM of principal guaranteed funds more than doubled from Rmb22.8 billion (five funds in 2010) to Rmb51.8 billion (22 funds in 2011); and money market funds also grew from Rmb153.3 billion (46 funds in 2010) to Rmb276.8 billion (51 funds in 2011).

Unfavourable capital market conditions last year widened the discrepancy between large and small fund houses, with the big players better positioned to preserve AUM by stuffing new funds into distribution channels, while small and new firms had little bargaining power with retail banks.

China AMC is still the largest fund management company in the country with Rmb179 billion in assets from 26 mutual funds, followed by E Fund (Rmb144 billion) and Harvest (Rmb138 billion). In fact, the top 10 FMCs manage almost half of the AUM for the entire industry of 66 companies. Meanwhile, the AUM of the four smallest companies is below Rmb1 billion.

Notably, a few FMCs have won out, largely attributable to the support of their shareholders which are large commercial banks. ICBC Credit Suisse saw its AUM grow from Rmb58 billion (2010) to Rmb70 billion (2011), becoming one of the top 10 FMCs.

CCB Principal, Bank of China Investment Management and Minsheng Royal all saw their AUMs increase in the last year.