Cerulli: Chinese Mutual Funds Weather Global Storm

After losing almost half of its assets under management in 2008, the Chinese fund management industry managed to recover some ground, posting a 17% growth in the first half of 2009 to climb back to RMB2.2 trillion (US$327 billion). According

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After losing almost half of its assets under management in 2008, the Chinese fund management industry managed to recover some ground, posting a 17% growth in the first half of 2009 to climb back to RMB2.2 trillion (US$327 billion). According to Cerulli Quantitative Update: China 2009, the precipitous decline in 2008 was largely attributable to depreciation in market values as net flows, albeit significantly lower, remained in positive territory.

Conversely, market appreciation accounted for the increase in AUM in 2009 as the industry witnessed net redemptions in the first six months, says Ken Yap, director and Cerullis head of Asia-Pacific research. Large fluctuations in year-on-year growth is symptomatic of a developing industry but China still managed to post a very commendable 55% CAGR between 2004 and June 2009, added Mr. Yap.

Cerulli projects the Chinese mutual fund industrys assets under management to grow at a CAGR of 16.9% over the next five years, reaching RMB4.4 billion by 2013.

The retail fund industry is on course to recover from the steep asset decline in 2008 and is expected to regain its position as the biggest mutual fund market in Asia ex-Japan by 2013, says Jamie Poh, Cerullis lead analyst on this report. China will continue to be the key engine of asset management growth in Asia, alongside India. While several problems persist, particularly those pertaining to regulations, Cerulli maintains an optimistic outlook as the retail market regains its footing.

On the much-vaunted Qualified Domestic Institutional Investor (QDII) program, the Cerulli report points out that the wave of hype that accompanied the rollout of the first QDII funds at the height of the economic boom in 2007 has all but dissipated.

Excitement has given way to disenchantment over losses incurred by these overseas-invested funds. Barring any setbacks, cross-border investment is still something that China wants to pursue over the longer term, especially since Chinese investors need greater portfolio diversification.

In 2004, Cerulli became one of the first international research firms to conduct proprietary surveys of the largest Chinese asset managers and has continued to expand its coverage to include local players as well as foreign joint ventures over the years. In addition to asset managers, this report also showcases the results of surveys of regional banks in China.

D.C.

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