Fund firms to launch new services

Nine Chinese fund management firms have won regulatory approval to launch so-called "segregated account management services". Markets on Monday rose, apparently in response to this news. But some experts are questioning how much it will really appeal to potential customers.

Nine Chinese fund management firms have won regulatory approval to launch so-called "segregated account management services".

The segregated account management service is only available to individuals and institutions who can stump up a minimum of 50 million yuan. Official approval means mutual fund firms can set up hedge fund-type accounts to manage assets for the super-rich or institutions. Brokerages are upbeat, saying this could be a very lucrative source of income.

Li Haipeng, VIP Manager of China Southern Fund Management said "We expect the service to generate half our total business revenues in the future. So it's going to be very very important for us."

And brokers have reason to be cheerful because of what they'll earn in terms of fees. But some experts are skeptical about how attractive this new service will be to those who actually have that much money to spare.

Hu Lifeng, Chief Fund Analyst of Galaxy Securities said "For one thing, companies who buy mutual funds do not pay tax. But if they use the segregated account management services, they have to pay company income tax, which could be a lot. Also, mutual funds do not charge performance fees, while segregated account holders have to pay as much as 20 percent in such fees."

But the stock market seems to have welcomed the news, with many attributing gains on Monday to the launch of this service. Investors expect funds to absorb more money from the new service and pour it into the equity market.