China Securities Regulatory Commission (CSRC) has granted approval to a second batch of asset managers to launch retail-focused fund of funds (FOFs) products, six months after giving the nod to the first group.
In a statement posted on its website on March 7, the regulator says it has granted FOFs qualification to three new managers: CIFM Asset Management, First Seafront Fund Management, and ZhongRong Fund Management.
A fund of funds is multi-manager investment strategy, which invests in a portfolio containing different underlying assets.
The first six asset managers to have received CSRC approval last September have already launched their products, raising a total of over 16 billion RMB (US$2.52 billion), led by China Asset Management (China AMC) with 4.68 billion RMB.
Other asset managers in the first group include CCB Principal Asset Management and Harvest Fund Management.
According to Rachel Wang, director of manager research at US-based investment research firm Morningstar, the FOFs were well-received, with the six managers each raising an average 2-3 billion RMB – which was mainly due to the products being able to meet growing demand from Mainland investors for greater asset allocation.
“That said, whether the new FOFs products will continue to draw market traction is dependent on various factors. For example, new FOFs managers need to differentiate their products from existing players and deliver consistent performance,” Ms. Wang tells Asia Asset Management.
Meanwhile, CSRC released guidelines for retirement-focused securities fund products on March 2, suggesting that they can be structured in the form of FOFs.
“Overseas experiences show that FOFs are good products for pension investment because of its asset allocation feature,” Ms. Wang says.
“The reform of the private pension market is still underway in China. As such, the government wants to make sure that all feasible pension products, including FOFs, are available on the market before it unveils the details of the policy,” she adds.
Robert Chen, head of asset allocation and passive investments at Harvest Global Investments, predicts that the emergence of FOFs will help broaden the market.
The FOFs will also benefit the exchange-traded fund market because they can invest in ETFs for portfolio allocations, he adds.
CSRC had planned to introduce FOFs to retail investors after the A-share market crash in 2015 as part of plans to reinvigorate the market. The move was delayed due to extensive market consultations.
