Chinese fund houses lose Rmb125 billion in first half

Jul 24, 2011

Negative Chinese stock-market performance has hurt domestic mutual-fund returns, with not a single mainland asset manager making a profit in the second quarter.

It's been a dismal year so far for China’s 61 mutual-fund managers. They recorded an aggregate loss of Rmb89.4 billion in the second quarter, resulting in a total first-half loss of Rmb125 billion ($19.4 billion). Not a single fund-management company (FMC) turned a profit in Q2, according to quarterly reports.

Mutual-fund performance suffered even more in the second quarter than in the first, mainly due to the A-share market correction. The Shanghai Composite Index fell 6% in the second quarter after a first-quarter rise; it dropped 2% over the first half.

The total Q2 losses for equity funds and balanced funds were Rmb61.2 billion and Rmb27.4 billion respectively, and fixed-income funds lost Rmb626 million, according to Beijing-based consultancy TX Investment. Only money-market funds have made a profit, totalling Rmb1.4 billion.

Investor confidence in mutual funds continued to decline in the second quarter, with net redemptions totalling 50.9 billion units, or 2% of the whole industry, despite 60 new funds launching in the same period.

During the first half, 40 Chinese FMCs recorded losses of more than Rmb1 billion and, of those, seven lost more than Rmb3 billion.

Moreover, it seemed that the bigger a company's AUM, the harder it fell. China AMC, E Fund and Yinhua were the top-three money losers in the second quarter, with their profits shrinking by Rmb7.5 billion, Rmb6.7 billion and Rmb5.4 billion, respectively. China AMC and E Fund are the top two FMCs by AUM, while Yin Hua ranks in the top 10.

The three smallest FMCs – KBC GoldState, BNY Mellon Western and Axa SPDB Investment Managers – suffered the smallest losses.

So which FMCs were the most successful – or rather, the least unsuccessful – in the second quarter? Some at least posted smaller losses in the second quarter than the first.

The two biggest 'winners' were Hua Shang and China Universal, which reduced losses by 55% and 34% compared to the first quarter. Citic Prudential, Huatai PineBridge, Galaxy and Manulife Teda also improved their bottom lines.

Among the 762 mutual funds on offer, 167 made profits for investors in the second quarter. Guangfa Ju Feng Equity Fund posted the highest gain of Rmb81.4 million and returned 0.32%, outperforming the benchmark by 5.28%. Lion FMC’s Global Gold Fund (a QDII product) also saw its net asset value increase by 2.88% and made Rmb736 million in profit.