Topic: China’s QDII fund
Author: InvesTAO Research
Summary
- QDII funds, the only group of mutual funds in China that are dedicated to investing offshore and overseas assets, held net assets of US$39 billion and grew by an annualised rate of 52% over the last three years. However, when compared with China’s total mutual fund universe, it only accounts for 1.2% to 2.2% of the total net assets (excl. MMF). This signals the extensive potential for future expansion of QDII.
- The risk appetite of QDII investors has been increasing since Q1 2020, as equity allocation rose from 64% to 86% and fixed income allocation dropped sharply to 2%.
- A “true” global allocation via QDII funds has yet to be realised in China. Despite the majority of allocation to Hong Kong equities which are technically categorised as offshore assets, QDII allocations are focused on China-oriented assets, i.e., ADRs and Asian EM equities that benefit from Chinese industrial reforms. The home-market bias can also result from the late opening of the QDII quota.
- Compared to Q1 2021, both Consumer Discretionary and Communication Services, the two sectors representing the Internet section, gained the most weighted increase in QDII portfolios. When compared with A-share funds, QDII funds are overweighting the two sectors by 23pp and 20pps respectively.