It was a sign of the volatile times in which investors live that, as the Shanghai Composite Index (SCI) was hitting a new high in early April, it was revealed that 95% of domestic equity funds failed to meet their first quarter benchmarks.
The local fund management joint ventures of ABN AMRO, Schroders and Deutsche Bank were among the 10 worst performing funds, said fund analysts Morningstar. Only nine of 183 equity mutual funds managed to beat the Shanghai-Shenzhen 300 index, which climbed 36% in the first quarter.
The underperformance was put down to managers being forced to keep up to 40% of their holdings in cash. This is so they are able to respond to rapid buying and selling of fund products by investors – a sign of uncertainty following the February crash.
Mutual fund assets are still thought to have grown by a quarter over the first three months and there is little evidence of the tide turning. The SCI, having left the 3,000 mark in its wake mid-March, closed on April 16 at a new record high of 3,597.215.
This inevitably led to talk of a pull-back of up to 15% by the end the month, perhaps fueled by expectations of another interest rate hike. It was rumored that March inflation had risen to 3.3% in March from 2.7% in February.
However, other analysts were happily predicting the SCI would pass 4,000 in May.