Chinese mutual funds raised a record 331.3 billion yuan ($53.4 billion) in May, as mainland retail investors were attracted by their lucrative returns, according to Z-Ben Advisors, a Shanghai-based fund consultant.
A rally in Chinese equities, with the Shanghai Composite Index reaching seven-year highs in the previous sessions, boosted returns on most Chinese mutual fund products.
More than 10 products posted above 150% returns year-to-date, while average return on equity funds exceeded 30% in the first quarter alone, prior to the rally in the second quarter, Z-Ben said in an emailed statement to NexChange.
“We believe the mainland stock market rally sparked investors’ — especially mass retail — interest to invest in mutual fund products. Outstanding return is one reason that Chinese investors are keen to invest into mutual funds,” said Z-Ben analyst Jackie Tang, who follows the mutual fund industry closely.
For the January-May period, total funds raised amounted to 841.8 billion yuan, more than double compared to the 407 billion yuan recorded for the whole of 2014.
Apart from the high returns, Chinese investors also prefer new products over old ones, said Tang. As a result, firms are launching new products every now and then to keep funds flowing.
Recently, mutual funds introduced so-called thematic funds such as those using the “New Silk Road” theme made popular by Chinese President Xi Jinping, who announced it in 2013 to coincide with the country’s aim of building roads and other infrastructure facilities that will boost trade and investment links with the rest of the world.
While Tang is optimistic that the strong fundraising may continue over the short-term given the upbeat prognosis on the performance of Chinese stock market in the next few months, he cautioned that mainland investors “are return sensitive” and could “react quickly to shift their assets to more low-risk and stable return products” once the stock market drops.
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