Mutual fund managers across China should enhance investor education and improve their management abilities to prepare for another year of expansion, insiders said after the combined money invested in such funds hit a record high.

By the end of last year, the mutual fund industry managed net assets worth 3.27 trillion yuan (US$442.5 billion), nearly quadrupling 2006's 856.4 billion yuan, according to a report made public yesterday by the research division of China Galaxy Securities Co Ltd.

China Asset Management Co, Bosera Asset Management Co and Harvest Fund Management Co secured the top three spots by each managing more than 200 billion yuan in funds.

"The industry expanded by leaps and bounds last year. The outlook for this year remains good, as the domestic stock market may continue to boom based on people's positive sentiment," said Sang Yu, general manager of marketing development department with the Great Wall Fund Management Co. "The securities regulator is also expected to introduce stock index futures, a 'through train' program and the reform of B shares to create more channels for investors, including our money managers."

Stock index futures will allow investors to sell short for the first time in the Chinese mainland, while the through train program enables investors to buy into Hong Kong equities through a Bank of China Ltd account in Tianjin.

Plans to merge hard-currency B shares with yuan-denominated A shares will consolidate the domestic stock market.

Meanwhile, the Qualified Domestic Institutional Investor scheme will continue to offer a channel for fund managers to source returns in overseas markets.

Yet some work needs to be done to prepare the industry for further expansion, said Sang.

First, fund management firms should enhance investor education. By the end of 2007, the industry had more than 100 million accounts under 363 mutual fund products. It meant that one out of four households opened an account.

However, many investors don't truly understand the differences between the products. They need to be informed about various risks instead of simply being encouraged to invest, said Sang.

(Shanghai Daily January 4, 2008)