A report has predicted Chinese mutual fund assets will triple by 2015 to reach over $1 trillion, and possibly doubling again by 2020, as policy changes are instituted to encourage the development of investment markets and internalization of the currency.
The report, commissioned by Citi and compiled by Z-Ben Advisors, attributes this potential growth to:
• Significant growth in the pension system designed to meet the demographic challenge of a rapidly aging population;
• Institutional investors diversifying away from direct holdings of sovereign bonds and into managed equity and alternative portfolios, in search of higher returns and lower correlations;
• The evolution of China as its own distinct asset class (separate from “BRICS” and emerging markets);
• The convergence between China’s share of global market capitalization (currently at 11 percent) and global investors’ significant underweight to Chinese equities (currently at 0.1 percent)
"Economic development has led to a large and growing middle class in China, however there has been a disconnect between Chinese savers becoming wealthier, but not investing their money," said Peter Alexander, managing director of Z-Ben Advisors in Shanghai.
“Regulators are keen to jump on this and to provide a stable environment that will underpin the country’s objectives for more big-picture economic growth.”
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