| Mutual Fund is undoubtedly an important option in the allocation of personal assets. Therefore, with the gradual spread of the wealth-management concept among local people, major financial institutions are scrambling to secure a share in the fund management market. As of the end of 2005, the number of domestic mutual funds had exceeded 500, underscoring the acute competition in the field. Although equity funds and bond funds are still the mainstream products in the market, judging from their scales their shares have been on the decline. With the booming development of financial engineering, various types of mutual funds emerged. Some fund management companies have introduced into the domestic market different kinds of mutual funds or obtained the technologies for fund designs via cooperation with foreign institutions. Meanwhile, some companies have extended their investments to overseas markets, thereby expanding their product lines.
In 2005, the most impressive event was that involving "structured note," which is the main culprit for the loss of many fund management firms. In order to comply with requirement of the Financial Supervisory Commission (FSC) for them to divest all of their structured notes by the end of 2005, fund management firms were forced to sell out their position for structured notes at discounts, or in the form of CBO (collateralized bond obligation) or ABCP (asset backed commercial paper). By the end of 2005, all domestic fund management firms had divested their structured notes, thereby enhancing the liquidity of their bond funds and their operational strength. |
