China Universal to close wealth management fund

19 August 2014   Category: News, Asia, China, Global   By Hui Ching-hoo

China Universal Asset Management (China Universal) has become the first Mainland asset manager to announce the closure of a mutual fund product, with the firm’s shareholders set to vote on the termination of its China Universal 28-day wealth management fund on September 16.

China Universal said that it wanted to drop the short-term wealth management product because it was similar to another 30-day fund, whose subscription and redemption cycle was better suited to clients’ investing patterns. The firm said the product’s closure would lead to unspecified cost savings.

China Universal currently has six short-term wealth management funds, with redemption periods of seven, 14, 21, 28, 30, and 60 days.

The performance of the majority of short-term wealth management products have trailed the market because of low liquidity, as these closed-ended funds can only be subscribed to and redeemed on designated days. This, together with the booming money market fund segment, has diverted capital out of the products, a Z-Ben Advisors’ analyst told Asia Asset Management.  

“Many fund managers have merged their wealth management products with other products because of their indifferent performance, but China Universal is the bellwether to terminate the so-called ‘mini funds’. We believe more fund managers will follow suit as relevant regulation has come out to formalise the termination process.”

The mini funds label normally refers to those sized below 50 million RMB (US$8 million); significantly lower than the 134 million RMB in AUM overseen by the China Universal 28-day wealth management fund, the analyst added.

Citing figures from Wind Information, Chinese media reported that the number of Mainland mutual funds with less than 50 million RMB in AUM has doubled to about 130 in the second quarter, from 69 in the same period a year earlier.