The scale of publicly offered Fund of Funds (FOFs) in China has continued its upward trajectory, exceeding a significant milestone.
As of July 12th, the total number of publicly offered FOFs reached 624, with their combined assets under management climbing to 374.53 billion yuan, according to data from iFinD.
A breakdown of the data reveals a diverse landscape. There are 6 equity FOFs, 344 mixed-asset FOFs, 29 bond FOFs, and 241 pension target FOFs, with respective asset values of 710 million yuan, 279.689 billion yuan, 28.092 billion yuan, and 64.866 billion yuan. Additionally, there are 4 FOF-type index products. Compared to the end of last year, the asset size of equity FOFs has decreased, while mixed-asset FOFs, bond FOFs, and pension target FOFs have grown by 123.654 billion yuan, 5.081 billion yuan, and 477 million yuan, respectively.
Factors Driving the Expansion
The record-breaking growth of FOF products is closely tied to a significant number of new issuances this year. Research indicates that the fundraising scale in the FOF new issuance market was 69.049 billion yuan in the first quarter and 48.693 billion yuan in the second quarter. Despite the overall high fundraising volume, there has been a noticeable divergence in the scale of individual FOF products. While 42 FOF products raised over 1 billion yuan each, 10 products raised less than 100 million yuan.
The momentum has carried into the second half of the year. The first batch of four China Securities REITs Total Return Index funds completed their fundraising swiftly, collectively bringing 1.196 billion yuan in incremental capital to the market. Among them, the Southern China Securities REITs Total Return Index fund sold out on its first day of offering on July 1st, while funds from China Asset Management and E Fund Management concluded their fundraising ahead of schedule on July 6th, followed by the fund from China International Capital Corporation on July 7th.
Industry experts view this expansion as more than a simple market cycle phenomenon. It is seen as a reflection of the ongoing release of asset allocation demand within the context of the wealth management industry's transformation. Against a backdrop of low interest rates and market volatility, the appeal of traditional wealth management products has diminished. FOFs, with their advantage of "double diversification," are widely recognized by the market for their attribute of providing steady long-term appreciation, positioning them as a "stable alternative" for capital.
Performance Divergence Widens
As the FOF market expands, performance differentiation among existing products is also intensifying. Data shows that, as of July 12th, 885 FOF products have generated positive returns year-to-date. Among these, 156 products have achieved returns exceeding 10%. The top performers, E Fund Advantage Return Mixed (FOF-LOF) A and C shares, have recorded year-to-date returns of 61.76% and 61.42%, respectively.
Delving deeper, the top ten performing FOFs year-to-date are all mixed-asset FOFs, with 423 out of 485 such products posting positive returns. Bond FOFs have generally underperformed, with the highest year-to-date return being only 3.42%. For equity FOFs and pension target FOFs, the maximum returns are 12.44% and 38.87%, while the maximum drawdowns are 22.31% and 12.04%, respectively. The proportions of these categories experiencing losses are 33.33% and 14.07%.
The performance gap between FOF products is evidently widening, particularly against the backdrop of strong growth in equity assets like those in the AI sector. This underscores that asset allocation capability is becoming the key differentiator in the competitive FOF market. Analysts note that the performance of some FOF products has failed to demonstrate the value of asset allocation, lacking the characteristic of controlling drawdowns in bear markets while capturing growth in bull markets. The FOF market is now entering a new phase of development characterized by survival of the fittest and a re-evaluation of value propositions.