Six public fund companies get approval for FOF

Six public fund companies were approved by the China Securities Regulatory Commission today to conduct Fund of Funds business.
Imaginechina

Six public fund companies got the approval to conduct Fund of Funds business from the China Securities Regulatory Commission today.

The China Securities Regulatory Commission released the first batch of licensed public FOFs this morning, indicating that the public funds has entered a new stage of FOF.

The six public fund companies were, namely, the China Asset Management, HFT Investment Management, the China South Asset Management, the Harvest Fund, Manulife Teda Fund Management and CCB Principal Asset Management.

A fund of funds is an investment strategy in which a fund is divided into a portfolio that contains different underlying assets instead of investing directly in bonds, stocks and other types of securities.

Data from the Asset Management Association of China showed that the overall scale of China's public funds market had exceeded 10 trillion yuan (US$1.5 trillion) by June of 2017. The number of funds also reached 4,419 to make it iincreasingly difficult for investors to choose funds in such a big market.

Comparing with the general funds, the public FOFs is better at fine selection, specialized management and the overall control of risks, according to the Harvest Fund.

Investing in a FOF allows the investors to test investing in professionally managed funds before they take on the challenge of going for individual fund investing, with advantages in large asset allocation and diversification of investment risks.

Sun Bin, in charge of the asset allocation at the China Asset Management, said FOFs can mend the incompleteness of the asset spectrum in China and add to the varieties of medium-yield portfolios.

Liang Min, manager of asset allocation and quantitative investment at CCB Principal Asset Management, said the development of FOFs in China may see a bumpy road ahead but the prospect is bright and broad.

"One challenge is that it needs time to testify the value of FOFs, especially against the present backdrop that individual investors tend to seek short-term profits," said Liang.

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