Half of Investment Funds that Chase Unicorns Sustain Losses

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Around 50% of Chinese investment funds that provide retail investors with a key channel for betting on recently listed “unicorn” companies have posted losses since the start of the year.

China has recently seen the emergence of “da xin” or “play the new” funds that specialise in freshly listed companies, and provide retail investors with a key channel for reaping benefits from the ascent of tech enterprises as WuXi AppTec, Foxconn Industrial Internet or Contemporary Amperex Technology.

For this reason da xin funds are also seen as a key channel for retail investors to enjoy the benefits of the listing of “unicorns” start-ups that are valued at over USD$1 billion.

Data compiled Securities Daily indicates that da xin funds have posted a poor performance over the past year, which industry insiders impute to both an easing in the rate of initial public offerings, and sizeable decline in the Shanghai and Shenzhen stock markets since the start of the year.

As of 27 May out of a total of 106 da xin funds on the market 51, or 48.11%, had sustained losses since the start of 2018, while only three posted returns of over 5%.

A research report from Guotai Jun’an Securities indicates that the median return of da xin funds in the first quarter of 2018 was just 0.29%.

Many da xin funds have also seen sizeable declines in asset scope this year as result of large-scale redemptions, with at least three posting quarter-on-quarter contractions of over 20%.

While da xin funds would ideally keep their assets within the 500 million to 1 billion yuan range, at least 28 funds have fallen beneath the bottom threshold.

Some funds have also gone into liquidation, such as Guotou Ruixian Xinjiazhi (国投瑞银新价值), which was founded three years ago and at one point reached 10 billion yuan in scale, before eventually shrinking to 50 million yuan just prior to running aground.

 

 

 

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