Caixin
May 10, 2021 08:14 PM
FINANCE

China Became Asia-Pacific’s Largest Open-End Fund Market in 2020, Report Says

China’s mutual fund market is catching global attention as it grows in scale and becomes more open to outside players.

The country became the Asia-Pacific region’s largest market for open-ended funds for the first time in 2020, according to a report released earlier this month by the U.S.-based Investment Company Institute (ICI), an investment fund industry organization.

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Total net assets in China’s regulated open-ended investment funds reached $2.7 trillion at the end of last year, up from $1.9 trillion a year earlier and surpassing Japan and Australia to become the largest in the region, the ICI report says, citing data from the International Investment Funds Association.

By total net assets, such funds make up the vast majority — 87% at the end of last year — of China’s mutual fund market, according to data from the Asset Management Association of China (AMAC), an industry group.

As China’s stocks rallied last year, investors bought into mutual funds that invested in the market. The booming market was also supported by retail investors’ greater willingness to put money in professional asset managers’ hands instead of buying and selling stocks themselves.

Last year, total net assets of open-end equity funds in China rose by 59% to 2.1 trillion yuan ($326 million), AMAC data show. Meanwhile, the benchmark Shanghai Composite Index rose by roughly 14%.

Equity funds and hybrid funds — funds that generally invest in a mix of stocks and bonds — as a proportion of the total net assets managed by open-ended funds in China rose to 37% at the end of 2020 from 24% a year earlier, AMAC data show.

In the Chinese context, mutual funds are often described as publicly offered funds (公募基金), which include close-ended and open-ended funds. Publicly offered funds and privately offered funds (私募基金) are the two major products in the asset management industry.

Global asset management giants have had more opportunity to tap into the Chinese market since regulators scrapped foreign ownership limits on their local operations in recent years. In August, BlackRock Inc. won approval from China’s securities regulator to set up a wholly foreign-owned mutual fund management company, the first on the Chinese mainland. Several other overseas asset managers, including Fidelity International and Neuberger Berman Group LLC, have also applied to set up such subsidiaries in China.

Despite its rapid growth, China’s mutual fund market is still small relative to those in the U.S. and some European countries. At the end of last year, total net assets of China’s open-ended funds were only equivalent to about 9% of the figure in the U.S., ICI data show.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Joshua Dummer (joshuadummer@caixin.com)

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