China’s asset management market is now entering a new stage as the market opens up for foreign players and as fund management begins to substitute ‘shadow banking asset’ based wealth management products. Along this transition, we have observed growing popularity of passive investments in China.
The year of 2018 is seen as the inflection point for China’s ETF market, where asset under management (AUM) grew to USD 56 BN with close to 40 new fund launched. The growth is driven by increasing awareness and application by both retail and institutional investors, development of broader range of products on the back of analytical capabilities advancement, as well as reduction of the unreasonably-high management fees.
Fund management companies need to move away from a product-centric mindset to develop different passive strategies that address the needs by different investors. More importantly, fund management companies and other financial institutions must collectively advance the maturity of the broader ETF ecosystem, from index development and management to market making.
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