Beijing-based Xiangcai Hefeng Fund Management has been cleared by the mainland securities regulator to launch China's first series fund with three sub-industry funds. The approval of the controversial product signals official endorsement of fund managers' new-found innovative spirit as growing peer competition and a stock market downturn slow fund sales. Xiangcai Hefeng, seven months old and 40 per cent owned by Shanghai-based Xiangcai Securities, planned to launch the fund series next month, said chief investment officer Zeng Zhaoxiong yesterday. The plan, approved by the China Securities Regulatory Commission (CSRC), envisions three open-end sub-funds launched under the same contract and issue prospectus and run by the same fund manager, but retaining relatively independent operations and accounts. Complying with mainland rules, up to 80 per cent of the equity-oriented portfolios would be invested in domestically listed stocks, with each sub-fund expected to raise a minimum of 200 million yuan (about HK$188.45 million). The strong-growth sub-fund would invest primarily in hi- and new-tech stocks, said Mr Zeng. The cyclical portfolio would target mostly manufacturing firms, whose performance follows China's economic cycles, and the stable-growth sub-fund would invest in public utilities and financial firms. China Merchants Fund Management is expecting CSRC approval soon for a similar product, with four open-end sub-portfolios of various risk levels. China has an unsophisticated fund management sector, where 54 of 71 existing investment funds are closed-end, and products familiar to more mature markets such as guaranteed and bond funds remain novel ideas.