Mutual funds double fees despite 1.1tr yuan losses
Mainland mutual funds racked up losses of 1.08 trillion yuan (HK$1.24 trillion) in the first half of the year but the red ink did not stop them doubling fee income from investors.
Based on the interim reports of 364 funds managed by 59 asset companies, a 48 per cent fall in the Shanghai Composite Index between January and June wiped out a combined 1.08 trillion yuan of their value from more than 3 trillion yuan at the start of the year.
Factoring in the funds that started operations this year, the total loss amounted to 1.2 trillion yuan, according to TX Investment Consulting. Mutual funds raised this year are exempt from preparing first-half reports.
'The bear run on the stock market exposed a lot of problems inside the fund houses to the public,' said Galaxy Securities analyst Li Wei. 'These are turbulent times for the fund industry.'
Some fund subscribers, the main victims of the severe losses, have cast doubts on the ethics of asset managers, accusing them of misusing the money placed in their trust.
Although small investors have been forced to lick their wounds, the fund houses still raked in handsome management fees. Beijing-based China Asset Management earned 1.53 billion yuan, topping rivals.
Fund investors paid a total of 18.8 billion yuan in management fees in the first six months, up 120 per cent from a year ago.
Shenzhen-based Bosera Asset Management collected 1.19 billion yuan of management fees, taking the No2 spot, followed by China Southern Fund Management, whose income hit 1.13 billion yuan.
The total loss for the first half was the largest in the 11-year history of the nation's securities fund sector.
The fund industry grew on a fast track last year as the stock market surged, with asset values increasing almost fourfold to exceed 3 trillion yuan. The Shanghai index jumped 96.66 per cent last year.
'It was basically the result of a weak market,' said TX Investment analyst Wang Guangguo. 'Whether the funds should be blamed for the sharp fall is a question though.'
Equity-focused funds that invested at least 60 per cent of their assets into stocks posted a total paper loss of 1.06 trillion yuan.
Funds that targeted the money market were the only bright spot, showing a paper profit of 1.3 billion yuan.
An increasing number of investors now believe that so-called 'rat accounts' are largely to blame for their troubles, as fund managers take advantage of the multibillion-yuan pool of funds to enrich their own pockets.
'They got rich on our loss,' said Zhou Shiyum, a retail investor who lost 1 million yuan in stock and fund investments this year. 'We were obviously cheated.'
A Galaxy Securities report shows about one-third of mainland asset managers running the funds have less than a year's experience.
Nonetheless, some managers remain unfazed, saying they are optimistic amid Beijing's loosening of monetary policies and a slide in global crude oil prices.
Eight fund managers surveyed by Reuters recently suggested that their allocations for equities will increase.
Qualified domestic institutional investor funds, overseas-equity-based products, reported a combined loss of 24.7 billion yuan.
'Bluntly, QDII is becoming a basket case,' said fund consultancy Z-Ben Advisors in a report. 'The good news is that regulatory authorities are unnerved and are further liberalising the scheme.'
To date, Beijing has approved 23 fund houses to sell QDII products while only nine of them have launched funds to tap the overseas market, according to China Securities Journal.
