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Companies Rush to Seek Permission to Form Mutual Fund Management Firms

By Zhang Yu and Wang Yuqian

(Beijing) — China's securities regulators have seen a mini-boom in applications to form mutual fund companies ever since a regulatory change made it less costly to create such investment firms.

From July to September, the China Securities Regulatory Commission (CSRC) has received requests from 15 companies to create mutual fund management firms, according to the CSRC's website. Only six such applications were filed in the first six months of the year.

The surge occurred after the CSRC said in July that a company can apply for a mutual fund license before it finishes most of the preparation for its mutual fund business, according to several people from investment fund companies.

Under previous requirements, companies had to prove that they had rented offices, hired employees, and installed infrastructure and software needed for the new operation before trying to get a mutual fund license. Maintaining these facilities and personnel while the CSRC reviewed a firm's request could be very costly because the process would often take more than a year, according to the sources.

Changing the rule was part of the government's effort to streamline administrative procedures and encourage the development of mutual funds, a CSRC spokesperson said when announcing the new regulation.

At the end of August, there were 104 mutual fund firms in China, including 44 with foreign investors, according to the Asset Management Association of China. Together they managed more than 8.5 trillion yuan ($1.3 trillion) worth of assets, roughly the same as all private funds, according to the association.

Some private funds managers are seeking to enter the mutual fund industry. Shanghai Rosefinch Investment Management, which had about 20 billion yuan worth of assets under management last year, for example, filed an application with the CSRC to transform itself into a mutual fund company. Large private fund company Shanghai Chongyang Investment also applied for a mutual fund license last year.

As of Sept. 31, the top 10 largest mutual fund companies managed assets worth 4 trillion yuan combined, accounting for 47.1% of the market's total, according to Zhao's report. From 2010 to 2014, the ratio had been about 50% every year, the report says.

Contact Wang Yuqian (yuqianwang@caixin.com); editor Ken Howe (kennethhowe@caixin.com)

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