The fast expansion of the mutual fund industry in China may reflect a taming of an investing community once summarily dismissed as gamblers.
Fresh figures underscore how last year conservative money managers and investors left money on the table.
A new report from Shanghai-based Z-Ben Advisors Ltd. says assets under management in the industry zoomed up nearly 38% to 2.68 trillion yuan in 2009, or about $392.56 billion. (See a summary of the report)
That would be a welcome increase most years. But the Shanghai Composite Index gained 80% in 2009 and an index widely tracked by mutual funds, the CSI-300, added nearly 96%–indications that the average mutual fund underperformed the broader market.
‘The asset management community was overly conservative,’ Peter Alexander, principal at Z-Ben, said in an interview.
Assets under management are nevertheless increasingly significant to the market, accounting for about 11% of the total $3.57 trillion market capitalization of the 1,786 stocks listed in Shanghai and Shenzhen at the end of 2009. Mutual fund investors controlled even more of the market capitalization–perhaps a third–if only the shares that are publicly floated are counted.
Overall, however, mutual funds didn’t gain much in popularity last year. Z-Ben data show the number of mutual fund units–similar to shares in the funds–actually fell slightly between the ends of 2008 and 2009, suggesting growth in overall assets under management was due to the market rise, not new investor money.
Tracking how many investors trade stocks in China can be elusive. China’s investment community may be as many as 120 million, based on the number of trading accounts opened at the end of last year, a rise of 15% during the year. But that number likely double counts many investors.
Mr. Alexander says managers and investors, not surprisingly, were worried going into 2009 after the global crash of the previous year. That partly explains why money was initially funneled into bond and money market funds.
But he said even as many investors allocated increasing amounts of their money into equity funds during the year, mutual fund managers often kept large amounts of cash on hand. That meant many stock funds didn’t capture the market’s full-throttle performance.
Also, he said regulators, who approve fund launches, were particularly keen on seeing firms introduce passive investment funds, such as those that track indexes like the CSI 300. That is a key development, Mr. Alexander said, because when Beijing finally permits stock index futures (rumors about the timing have been swirling for years) the products are likely to track the CSI 300.
From Mr. Alexander’s perspective, the more money that goes into such funds that track that index, the faster Beijing may feel comfortable to introduce a derivative product that allows investors to actively bet against the index.
As for the mutual fund’s impact on local stocks during 2010, Mr. Alexander says his team is on the lookout for a ‘feed-on effect’ from a burst of money into equity funds right at the end of last year.
December was the year’s best month for fund raising, with new products pulling in 68.3 billion yuan, or a whopping $10 billion. Most of that money raised last month was destined for stock funds, a bullish indicator. Plus, said the analyst, the government may increasingly act to slow property price rises, a factor that in the past has helped stocks.
* James T. Areddy,
* mutual funds
James T. Areddy
上海咨奔商务咨询有限公司(Z-Ben Advisors Ltd.)新近发表的一份报告说，2009年基金业的资产管理规模增长近37%，达到人民币2.68万亿元，约合3,925.6亿美元。（见英文版报告摘要）
James T. Areddy