The stock market’s sluggish performance is dragging down China’s market for private funds, as the amount of freshly-issued private funds flowing into the stock market has seen a dramatic year-on-year decline of 76 percent during the first seven months of 2018. 

“The risk for private funds investing in shares is relatively high in that interest rates are highly susceptible to the macro market and the capabilities of individual fund managers. The stock market has not been performing well and it’s hard to make money there now, which had a negative impact on the private fund market,” said Yuan Lijuan, sales director of Touzi.com.

Market players have become increasingly hesitant to come out with more investment products. Only 750 new stock funds were issued in July, with a total value of only 380 million yuan. 

The stock market is not the only area that wealth management companies are shying away from, private fund market as a whole has also seen sluggish growth in recent months. China’s private fund market boomed at the beginning of 2017, but then new asset management regulations launched in April created financing difficulties for private funds and smaller market players, thus they have started to quit the game. 

Experts say that regulators are scrutinizing the private fund market closely now. 

“Establishing a private fund company has gotten more complicated – you now even need a lawyer to deal with sophisticated operations. And since the government is emphasizing a shift to real economic assets, things have been slowing down a bit so it’s hard to get money right now. Private funds investing in the stock market and private equity funds are all being affected,” noted Feng Meiyun, general manager of Shanghai Jinrong Information Tech.

China’s private fund market had been growing rapidly until the beginning of this year. The value of the assets managed by private fund companies saw a seven-percent month-on-month increase in February but the rate has fallen since then and been negligible since March.