China’s mutual fund assets reached a record high in the second quarter thanks to capital appreciation, even though there was a net outflow from funds, according to Shanghai-based investment consultancy IIC Analytics.
Total mutual fund assets rose 2% from the first quarter to an all-time high of 16.8 trillion RMB (US$2.4 trillion) as of end-June, the firm says in a recent report. Assets were up 15% through the first half of 2020.
Improved risk appetite led to what IIC Analytics describes as the “largest-in-a-decade” shift from money market funds (MMFs) into higher-yielding products.
Investors pulled out 673 billion RMB from MMFs in the second quarter following a 1.04 trillion RMB net inflow in the preceding three months.
“The second quarter was characterised by outflows across the board…Money market funds took the brunt, reversing most of their inflows from the previous quarter,” the consultancy says in the report published in July.
It says the pull-out from low-risk MMFs into higher risk funds will likely prompt fund managers to review their existing product mix to see if they can meet the changing market demand.
MMFs have been the largest fund type in China since 2015, accounting for over half of overall mutual fund assets. They are mainly distributed via electronic platforms under e-commerce giants such as Alibaba Group.
Overall, there was a 449 billion RMB net outflow from mutual funds in the second quarter after a 1.94 trillion RMB net inflow in the first three months.
The second largest outflow after MMFs, of 1.42 billion RMB, was from passive equity funds.
Balanced funds, bond funds, and active equity funds recorded net inflows of 208 billion RMB, 130 billion RMB, and 31 billion RMB, respectively.
The top three managers with the largest inflows were Penghua Fund Management, China Southern Asset Management and Zhong Ou Asset Management.