China bond funds are growing at the expense of balanced and money-market products and as institutions increasingly favour 'tailor-made' mutual funds over segregated accounts.
China bond funds have grown as other domestic investment has shrunk, and they look set to attract big inflows amid market opening, bearish equity sentiment and local pension market expansion.
Despite last week’s volatility, US economic divergence may not signal a change to interest rates or an end to low bond yields.
The fund industry lost a net $1 billion in December, with global, high-yield and emerging market bond funds hit. But balanced funds shone, while equity funds also picked up.
Net inflows were dominated by fixed-income assets last year. Although inflows should remain healthy, they are unlikely to hit similar heights in 2013, says Lieven Debruyne.
Primary bond funds will no longer be able to boost returns by subscribing to IPOs, effectively forcing them to breach the contracts they have agreed with investors.