China Securities Index Co plans life-cycle indices

China's biggest index provider plans to launch two life-cycle index solutions before the end of the year with the aim of tapping an expected growth in demand for enterprise annuity products.

“The country’s new enterprise annuity scheme will boost assets under management and investment products,” said Pang Yaping, head of domestic marketing at China Securities Index Co. “For example, multi-asset exchange-traded funds are one of the most popular products with investors in the US’s 401k pension account programme.”

The firm is developing a series of target-risk indices that will span the risk tolerance spectrum from aggressive to conservative, and target-date products to track different compositions of assets. Pang declined to give more details.

Because China brought in the tax incentive scheme on January 1, he said future demand for annuity products is difficult to gauge, though the firm is confident it will rise. The total AUM in enterprise annuities increased by 4.5% in the first quarter of this year to Rmb630.6 billion.

Analysts have been optimistic about the tax scheme. Ping An Securities has previously estimated that EA assets could double to Rmb1.3 trillion ($158 billion) by 2016, while Shanghai-based consultancy Z-Ben Advisors has forecast annual growth of 30% between 2015 and 2020.

"We are still nurturing the market," said Pang. 

In June last year, mutual fund house Yinhua launched the CSI/Yinhua Growth Equity and Bond Constant Mix 30/70 Index Fund, based on one of CSI's existing indices, which is weighted 30% to equities and 70% to fixed income. As of July, the product had attracted AUM of Rmb704 million.

Employees in China are allowed to defer individual income tax on personal voluntary contributions to their enterprise annuity of up 4% of their monthly salary.