The dash by Chinese investors into fixed income after last year’s mainland stock market rout gave a boost to many domestic fund houses, with China Asset Management a major beneficiary.
The Beijing-based firm saw its bond fund assets nearly double year-on-year to $78 billion as of September 30, narrowing its AUM gap to the biggest player, Tianhong Asset Management, to $2.6 billion from $21.1 billion the year before.
ChinaAMC had been China’s largest fund house by AUM since 2007 but was overtaken in 2014 by Tianhong after the latter launched its flagship money market fund (MMF), Yu’E Bao.
As of end-September, ChinaAMC managed $110.1 billion of assets, a 49.06% increase from the year before, propelling it to 17th on AsianInvestor’s list of the biggest fund managers* by assets sourced from Asia Pacific, up from 40th the year before. (Though it is by no means the fastest-growing of its peers; the 10 leaders on that list were all Chinese.)
Drilling down further, ChinaAMC's MMFs grew 100% to Rmb354 billion, its bond funds 84% to Rmb146 billion and its equity assets 1% to Rmb201 billion. Fixed income assets accounted for 71% of the firm’s AUM at end-September, compared with 57% a year earlier.
As of September 30, Tianhong’s Yu’E Bao product stood at Rmb603.9 billion, accounting for 84% of the firm's total AUM, which grew 19% to $113 billion in the year to September.
The growth of ChinaAMC’s fixed income assets came from existing products; it didn’t launch any new bond or money-market funds during the period.
The firm did, however, set up 11 new equity-related funds in the year to September, of which eight launched between February and May 2015, amid the mainland market rally. The 11 new funds comprised one pure equity fund, eight equity exchange-traded funds and two hybrid funds with high equity concentration. Between them they raised nearly Rmb60 billion.
Another contributor to the firm's AUM growth was its performance. In the year to September 30, ChinaAMC saw its funds generate returns of Rmb51 billion, the most among its mainland peers and about one-tenth of the industry pie, according to TX Investment Consulting. ChinaAMC has been the largest return generator among domestic fund houses since 2012.
Chen Qian, head of marketing at ChinaAMC, declined to discuss its product launch plans, but said the current risk-off environment would boost demand for bonds issued by central and local governments and policy banks as well as central bank notes.
In respect of equities, Chen said the firm saw it as inevitable that Chinese households’ asset allocation would steadily shift from real estate into securities markets. This trend will continue to see new flows into certain sectors, including those benefiting from China’s structural reforms, such as new technology industries and blue-chip stocks with low valuations and high dividend rates.
*The list will appear in full in the upcoming (March) issue of AsianInvestor magazine.