China’s asset management industry is witnessing divergent reception for its newly launched performance-linked funds, with one product potentially hitting its RMB 2 billion cap while others report modest sales. Orient Securities Asset Management’s (Oriental Red) Core Value Mixed Fund became the first to close subscriptions early on June 4, though the firm hasn’t confirmed whether it reached its fundraising limit.
Early Closure Signals Strong Demand
The Oriental Red fund, managed by veteran Zhou Yun, was among 16 variable-fee products launched on May 27 under China’s fee structure reform initiative. While official announcements haven’t cited the closure reason, industry sources suggest the fund likely hit its RMB 2 billion target. “Their sales channels executed well, though self-investment by the firm wasn’t the decisive factor,” noted one asset management executive.
Other firms report slower momentum:
- Multiple funds launched June 3-4 remain open for subscriptions
- Several managers describe sales as “average” or “moderate”
- A RMB 300 million raise currently ranks as top-quartile performance
Industry Challenges Persist
The rollout faces headwinds from:
- Limited bank channel preparedness – many lacked marketing materials
- Investor skepticism after recent fund performance disappointments
- Concentrated product launches straining distribution capacity
“The days of blockbuster fund debuts are fading,” observed a Shanghai-based wealth manager, highlighting reduced frontline sales resources.
Firms Demonstrate Commitment
Asset managers are reinforcing confidence through:
- Self-investments: Fullgoal Global allocated RMB 20 million to its product; China Europe injected RMB 10 million
- Lock-up periods: Mandatory holding periods for firm purchases signal long-term conviction
- Staggered launches: Subsequent batches avoid overcrowding initial sales windows
The variable fee structure – where management charges fluctuate with performance – aims to better align manager incentives with investor outcomes. While early adoption appears selective, the model represents a strategic shift toward performance-based compensation in China’s RMB 27 trillion fund industry.
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