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Livestreaming takes China mutual funds by storm: innovation or cowboy investing?
IN a Shenzhen milk-tea shop popular with social media influencers, mutual fund manager Deng Jingdong pins a lapel mic to his shirt, stares down the barrel of a camera, and starts livestreaming to his 400,000 viewers.
To rack up more likes and followers, offers of cash giveaways and free bottles of Kweichow Moutai - the fiery liquor coveted by China's elite - flash across the screen while Mr Deng extols the virtues of his new fund for Invesco Great Wall Fund Management Co, the local arm of US-based Invesco Ltd. Hosted on the ubiquitous Alipay app, viewers can click an icon and be taken to a page where they can buy directly into the fund, which invests in food, beverage, travel, and healthcare stocks that are listed in China and set to benefit from upwardly mobile consumers buying more expensive products.
Welcome to the cutting-edge and cutthroat world of China's 18.3 trillion yuan (S$3.7 trillion) mutual funds industry, where traditional fund distribution networks like banks are overwhelmed by colourful and noisy livestreamers and globally renowned names such as BlackRock Inc and Vanguard Group Inc hold little clout among a young, tech-savvy investor class. The shift has gathered steam as Covid-19 lockdowns confine people to their couches and foster an online shopping boom.
"Every asset manager is jumping on the bandwagon," says Ken Kang, the Shenzhen-based chief executive officer of Invesco Great Wall. "Livestreaming is really a new phenomenon this year but has taken off fast."
Last year, Invesco Great Wall relied mostly on text and voiced-based social media to promote products, but this year it's gone all-in on livestreaming, with fund managers hosting more than 90 sessions. During Mr Deng's appearance, graphics show his returns, industry experience, and a rough breakdown of the fund's holdings to entice viewers to become investors.
For foreign companies trying to break into, or win, a bigger slice of the market as China opens its financial sector, it can be an alien and at times bizarre environment. Funds backed by international companies raised US$470 billion from mostly Chinese retail investors in the first eight months of the year, less than half the US$967 billion raked in by more than 100 local rivals, according to data compiled by Morningstar Inc and Bloomberg. Of the 10 biggest funds raised, only two were backed by foreign companies.
"Online presence and engagement are extremely important in China," says Yoon Ng, a senior director at Broadridge Financial Solutions Inc, which provides financial technology services for companies including asset managers. For foreign companies "to compete in the market, you need to move very fast".
The shift comes as a generation of tech-savvy digital people reach an age where they have enough money to invest and are looking for ways to increase their wealth. Online platforms are playing a rapidly increasing role, most notably in the past five years after popular sites obtained fund-sales licences to sell mutual funds. East Money Information Co's 1234567.com.cn, one of the largest third-party distribution platforms, sold 659 billion yuan of funds last year, beating traditional distribution giants such as Industrial & Commercial Bank of China Ltd.
"In the past, fund management companies would be quite happy if a new fund collected 2 billion to 3 billion yuan in its initial launch," says Lu Haiyang, CEO of Hongtai Wealth, the distribution unit of investment group Hongtai Aplus. "Now a well-known manager can easily raise more than 10 billion yuan if online distribution channels are used."
With 1.3 billion mobile Internet users, more than any country in the world, China's tech platforms have disrupted the Chinese finance sector. Led by Ant Group Co and Tencent Holdings Ltd, a raft of new but pervasive players have uprooted sectors from loans to insurance to asset management.
Ant has sold mutual funds to more than 500 million people and is distributing products for more than 20 asset managers, including Invesco's local venture. The fintech giant offers livestreaming services for asset managers on its Alipay app, which has one 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. That's prompted a race for talent.
Among local finance influencers, few command as loyal a following as Zheng Zhiyong. A 10-year fund veteran, he operates personal accounts on multiple platforms under the nickname "Wangjing Bogle," a homage to Vanguard founder and index fund legend John Bogle. Based in Bejing's Wangjing tech hub, Mr Zheng has almost 500,000 followers on Alipay and more than 200,000 on China's Xueqiu, an investment-focused, Reddit-type site, and 1234567.com.cn.
Almost 3,000 members pay him 1,000 yuan a year for access to his daily investment picks. Mr Zheng chooses lower-fee funds, like certain exchange-traded funds, for his portfolio and buys on Internet platforms, which often offer low subscription fees compared with bank channels. He says this gives his followers a cost advantage in the long term over banks and other distributors who tend to pick higher-fee products to earn higher commissions.
Mr Zheng is also paid to host livestreams. Part cheerleader, part quizmaster, he's paid about 20,000 yuan by asset mangers to co-host segments with their fund managers. While regulations prohibit him from offering investment advice, he brings a significant following. "The Chinese model is quickly evolving from the old US model to an Internet-based one," he says.
After a decade working for fund management and securities firms, Mr Zheng went solo in 2018 on Internet platforms and quickly gained popularity. He couldn't have picked a better time. China's population has become more affluent, and the younger generation is increasingly eager to invest and learn from professionals.
Understanding the country's Internet landscape is key for global companies, because a successful online fund launch typically requires a well-orchestrated strategy involving not only big platforms such as Tencent and Alipay, but also financial news portals and distributors' own platforms, Hongtai's Mr Lu says. To be a hit, funds need to synchronise promotion across media platforms before opening up subscriptions to users on multiple distribution channels. "When people across all platforms start paying attention at the same time, panic-buying could be induced" and sales will spike, Mr Lu says.
Catering to local habits
Atlanta-based Invesco, which has been in China since 2003, knows only too well how different the local market can be. It's placed such an emphasis on catering to local habits that it's even created short, dramatic, Imperial China-themed anime in which Chinese emperors and their concubines discuss mutual fund investment strategies.
Even so, Invesco's Mr Kang says it's hard to measure how effective the company's marketing dollars are at bringing in new users and fund purchases. While Invesco can track the number of clicks, viewers, and comments for its livestreaming sessions, it's unclear whether the people become customers, he says.
China's online platforms are also rife with bots, and livestreaming viewers and comments can be fabricated. In a research report published in November, short-selling firm Muddy Waters accused videostreaming platform Joyy Inc of creating bots to generate fake transactions and users. Joyy said in a company statement responding to the Muddy Waters report that it contained numerous errors.
Meanwhile, fund manager Mr Deng and his colleagues continue to take turns livestreaming on Alipay almost weekly. Mr Deng's performance - 5.5 billion yuan of assets under management and a 31 per cent return for his best fund - is laid bare for all to track on East Money. "China is going through a consumer spending upgrade, and it's happening especially fast in smaller cities and rural regions," he says during his livestream, as a bartender shakes a cocktail behind him. "That's creating a lot of investment opportunities among emerging local Chinese brands." BLOOMBERG