Caixin
Nov 06, 2020 08:57 PM
FINANCE

Way Out Emerges for Investors Trapped in Ant Group Funds

More than 10 million retail investors poured 60 billion yuan into five funds launched in September to invest in listed companies in emerging and high-tech industries like Ant Group, as well as in bonds.
More than 10 million retail investors poured 60 billion yuan into five funds launched in September to invest in listed companies in emerging and high-tech industries like Ant Group, as well as in bonds.

As the fallout from Ant Group Co. Ltd.’s suspended IPO continues to reverberate around the markets, fund managers and regulators are working out how to placate angry investors trapped in funds that had subscribed for billions of yuan of the fintech giant’s shares.

More than 10 million retail investors poured 60 billion yuan ($9 billion) into five funds launched in September to invest in listed companies in emerging and high-tech industries and in bonds. The publicly offered funds had promised to invest as much as 10% of their assets in Ant Group shares to be listed in Shanghai. Now, with the record-breaking IPO suspended, some investors want their money back and others want the 18-month lock-up period on selling their shares in the funds scrapped. But the fund managers’ hands are tied by the terms and conditions of the funds and by the need for regulatory approval to alter them.

The China Securities Regulatory Commission (CSRC), the country’s stocks watchdog, weighed in on the debacle on Thursday, releasing a statement (link in Chinese) calling on the managers of the five funds to fully consider investors’ legal claims, stick to the principle of prioritizing fund-holders’ interests and protect their rights.

The five fund managers — E Fund Management Co. Ltd., Penghua Fund Management Co. Ltd., China Asset Management Co. Ltd., China Universal Asset Management Co. Ltd., and Zhong Ou Asset Management Co. Ltd. — each raised 12 billion yuan for their funds. In separate statements on Thursday they said they would apply to the CSRC and the stock exchange to allow the shares in their funds to be traded on the secondary market. Once the applications are approved, investors will be able to sell their shares free from the 18-month lockup limit. They said they wanted to reassure investors that it would “do their best” to dig out other good investment opportunities now that Ant Group’s IPO had been suspended.

“We hope that fund holders continue to trust us and hold their shares for the long term,” E Fund Management said in a statement posted to Alipay, Ant Group’s online payment platform which was the sole third-party distributor of the five funds. The money used to subscribe for the fintech group’s shares will be refunded to the fund management company’s account, it added.

Investors who do decide to sell their shares on the secondary market, if the CSRC gives permission, could be faced with losses because buyers may demand a discount as they will be subject to the 18-month lock-up period, a fund management source told Caixin.

As well as offering refunds to fund management companies, Ant Group needs to repay subscriptions to other retail and institutional investors. In a Thursday statement, the company said underwriters will return the funds and brokerage commission fees plus interest to Chinese mainland investors. It has also pledged to refund the subscription funds and commission fees to Hong Kong retail investors. But Hong Kong investors who borrowed money to subscribe may face losses as may will still have to pay interest on the loans.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Nerys Avery (nerysavery@caixin.com)

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