By Summer Zhen and Samuel Shen
HONG KONG, June 9 (Reuters) - Money managers in China are struggling to lure retail investors, with fundraising by mutual funds in the first five months of the year hitting the lowest in four years and few betting on a near-term rebound, amid diminishing returns and economic challenges.
More than 200 million Chinese retail investors, sitting on billions of yuan in savings, have turned bearish on equities and are instead doubling down on safer assets such as deposits and treasury savings bonds, amid a sputtering economic recovery and rising unemployment.
Newly launched funds raised a total of 432.1 billion yuan ($61 billion) in the first five months, the smallest amount since the same period in 2019, according to data complied by Z-Ben Advisors, a fund industry consulting firm.
The number is even lower than that of 2022 when many Chinese cities were under strict COVID-19 lockdowns, and is only one-third of the same period in 2021.
The trend underscores the challenges Beijing faces in restoring confidence in local markets as the country's post-pandemic recovery loses steam, which has also prompted foreign investors to sell Chinese shares.
China's benchmark CSI 300, which has posted two straight years of losses, has given up all of its early 2023 gains after a recent slew of disappointing consumption, factory and trade data. As of Thursday's close, the index was down 1.3% year-to-date.
"The wealth effect is missing," said Jiao Jinyuan, director of online distribution at China Asset Management. "Client sentiment is unlikely to turnaround until they see an improvement in the wealth effect."
Moreover, many retail investors are also sitting on losses after having chased funds at their peak levels in the past few years, which has made them pessimistic about fresh investments, fund managers said.
Star fund manager Zhang Kun, who manages nearly 90 billion yuan for Guangzhou-based E Fund Management, has seen his flagship 56 billion yuan Blue Chip Selected Mixed Fund lose 8% so far this year.
The fund soared 95% in 2020 which attracted significant subscriptions and helped Zhang become China's first so-called "100 billion fund manager". It dropped 10% in 2021 and 16% in 2022.
Another high profile fund manager, Ge Lan at Lombarda China Fund Management, saw her flagship 28 billion yuan healthcare fund retreat 7% in 2021 and 23% in 2022, after a nearly 100% gain in 2020. The fund has lost 12% so far this year.
On average, equity funds posted a 20%-30% accumulated loss in the past two years, industry participants estimate.