China Warns Against ‘Entertaining’ Investors With Fund Pitches

(Bloomberg) -- China's asset management association warned funds to steer clear of marketing that verges on entertainment, underscoring scrutiny over money managers increasingly resorting to livestreaming to win over investors.

Mutual funds are prohibited from organizing and participating in entertainment events, and need to uphold standards of long-term and value investing, the Asset Management Association of China said on its official WeChat account on Wednesday. The industry group is supervised by China's securities regulator.

“Entertainment doesn't match the sombre, professional and stable image of funds, so this proposal is timely,” said Liu Yiqian, an analyst at Shanghai Securities. “After a new phenomenon emerges, guidance is needed, so the industry can maintain professionalism and develop in a healthy fashion.”

The message targets the country's 146 mutual funds that have in the past year embraced livestreaming and short videos to woo investors online, a trend bolstered by virus lockdowns. Fund managers have been pulling out all the stops to catch the attention of investors, seeking to win a larger slice of the nearly 20 trillion yuan ($3 trillion) industry.

Read more about the cutthroat mutual fund livestreaming industry in China

Traditional fund distribution networks like banks are often overwhelmed by colorful and noisy livestreamers, meaning globally renowned names such as BlackRock Inc. and Vanguard Group Inc. hold little sway among young, tech-savvy investors. The shift has gathered steam as Covid-19 lockdowns confine people to their couches and foster an online shopping boom.

With 1.3 billion mobile internet users, more than any other country, China's tech platforms have disrupted the Chinese finance sector. Ant Group Co. for example has sold mutual funds to more than 500 million people and is distributing products for more than 20 asset managers. The fintech giant offers livestreaming services for asset managers on its Alipay app, which has 1 billion users.

The market is ultracompetitive. Other platforms including those operated by Nasdaq-listed Bilibili Inc. and TikTok's owner, ByteDance Ltd., are racing to beef up their finance channels to attract viewers keen on learning how to invest.

©2021 Bloomberg L.P.

With assistance from Bloomberg