China will develop its mutual fund industry, which is struggling to produce returns for investors.
It plans to allow eligible securities houses, insurers’ asset management units and private equity funds to develop and manage mutual funds.
The move will open an already-crowded sector to more competition. The Chinese mutual fund industry already has more than 60 companies vying for a pool of investors who have grown steadily disenchanted with Chinese equity markets.
Mainland stock markets have historically failed to produce positive returns for most retail investors, according to recent survey data from the Southwest University of Finance and Economics in Chengdu.
At the same time investors are now able to invest in exchange-traded funds (ETFs) that passively track indices, diminishing the need for active management.
Some mutual funds have recently begun moving money into China’s rapidly developing bond and money markets, which have proven more popular with many investors given their greater stability. However, such funds produce far smaller management fees for fund managers.
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