The dynamic landscape of public fund management in China has witnessed a significant turning point this year, primarily driven by the meteoric rise of Exchange Traded Funds (ETFs). As the market has begun to stabilize, the increased importance of ETFs has reshaped the hierarchy among public fund companiesThe performance and management scale of these companies have been closely tied to their ability to leverage ETFs, leading to a marked transformation in the competitive landscape.

With the soaring popularity of index funds, the rankings within the fund management sector have shifted dramaticallyLeading players such as Huatai-PB and Southern Fund have escalated their standings, propelled largely by the robust growth of broad-based ETFsMeanwhile, other firms lacking a foothold in the ETF market have started to see their rankings decline, underscoring the growing influence of ETFs in determining success within the public fund arena.

As ETFs proliferate, they are not only impacting individual fund company rankings but also influencing the broader industry ecosystem

The consensus within the sector has grown that those who gain a stronghold in ETFs will ultimately dominate the marketThis has led major fund managers to aggressively target the broad-market index space, while smaller and midsize firms are focusing on niche index offerings, resulting in a fiercely competitive environment.

A particularly notable success story in this context is that of Huatai-PB Fund, which has emerged as a formidable player this yearBy the end of the third quarter, Huatai-PB's non-cash management scale soared to ¥591.08 billion, a staggering increase of over 50% from the previous quarter, effectively doubling its size since the end of last yearThis growth trajectory has allowed Huatai-PB to surpass the historic heavyweight of the Shanghai fund market, E Fund, which previously wielded control over a significant portion of the managed assets.

In the current ranking of non-cash management scales, an analysis by Tianxiang Investment Consulting shows that the top ten firms include well-known entities such as E Fund, Harvest Fund, and GF Fund, with Huatai-PB showcasing its remarkable ascent to the eighth position

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Southern Fund has also made strides, with its non-cash management reaching ¥694.17 billion, reflecting a growth of more than 20% from the previous quarter and affirming its place within the top five firms.

In this competitive space, firms like E Fund and Harvest Fund are engaged in an intense rivalry, both exceeding the ¥1 trillion mark in their non-cash management scale, maintaining rapid expansionBy the close of the third quarter, E Fund's non-cash management scale reached ¥1.45 trillion, bolstered by a 19.07% increase since the last quarter, while Harvest reported a 20% increase to ¥1.25 trillion, illustrating a strident battle for supremacy amongst leading fund managers.

The shakeup in public fund company rankings, although surprising, is not entirely unexpectedThe explosive growth of ETFs has served as a catalyst for the substantial scale expansions of these firms

The frontrunners in this assembly of fund managers boast core broad-based ETF products critical to their successHuatai-PB’s flagship Huatai-PB CSI 300 ETF stands as one of the largest in the market, reflecting the weight and influence of ETFs in asset management.

Data shows that the net subscription of the Huatai-PB CSI 300 ETF surpassed ¥200 billion in the first three quarters of this year, with its total scale reaching an impressive ¥397.55 billion by the end of the third quarterThis single ETF accounts for nearly 70% of Huatai-PB's total non-cash management scale, further emphasizing the crucial role of ETFs in driving growth.

Furthermore, E Fund’s flagship CSI 300 ETF stands at ¥263.45 billion, while its ChiNext ETF has also crossed ¥90 billion, showcasing that multiple players are capitalizing on the lucrative ETF marketHarvest Fund similarly boasts several mega ETFs, including the Harvest CSI 300 ETF and the Harvest SSE 50 ETF, both exceeding ¥160 billion in scale

Southern Fund’s large-scale growth products include the Southern CSI 500 ETF and the Southern CSI 1000 ETF, further illustrating the trend of expanding ETF offerings across these major firms.

Amidst this frenzy of growth, not all firms have fared equally wellSome companies focused primarily on actively managed equity funds are struggling to keep paceFor instance, by the end of the third quarter, Jiao Yin Schroder Fund saw its non-cash management scale dip slightly to ¥273.07 billion, resulting in a ranking slip to the 21st position, highlighting the challenges faced by firms slow to adapt to the ETF trend.

As the competition heightens, a rate war has emerged within the industry as firms vie for a larger market share by slashing fees on various ETF productsMajor companies like Harvest Fund, Penghua Fund, and Huafu Fund have announced reductions in their ETF rates in an effort to attract more investors.

The recent fee reduction strategies have demonstrated a pattern wherein leading fund companies opt to cut fees for their most popular ETFs

Since October, over 20 index funds have announced fee reductions, employing a new minimum fee model of “0.15% + 0.05%,” primarily targeting emerging themes such as ChiNext ETFs.

For example, on October 16, Harvest Fund declared a reduction in management and custody fees for their ChiNext 100 ETF, a move aimed at attracting more investors by lowering their investment costsAs these fee wars unfold, many fund companies may be compelled to follow suit, or risk losing market share to competitors who decrease their entry barriers.

This battle for fees is paralleled by a fierce fight to issue new funds; new broad market indices tend to attract immediate attention from fund managers eager to capitalize on new opportunitiesOne such hot zone is the CSI A500 Index, which has garnered attention from over 70 fund products aiming to capitalize on the index’s potential for high returns.

Industry insiders regard the CSI A500 Index as a critical broad market offering, leading to a stampede of fund companies attempting to establish their presence in the segment

With various top-tier firms investing in both ETF and off-market index funds linked to the index, it showcases a desperate scramble for relevance in an increasingly competitive space.

Looking towards the future, the prevailing belief is that the adage “who secures the ETFs secures the marketplace” has solidified into a common understanding among industry participantsWhile the initial phase of ETF development in China shows promising growth, experts draw parallels to abroad experiences that suggest a tendency toward a “winner takes all” scenario in which leading firms will dominate the field.

As articulated by Chen Ge, General Manager of Fortune Fund, the rapid development of the ETF market in China highlights a vast potential for growthCompared to mature markets, the Chinese ETF landscape still exhibits considerable room for advancement—with significant opportunities waiting to be grasped during this critical developmental phase.

Assistant General Manager Xu Zhiyan of Huafu Fund points out that ETFs possess distinct advantages over other investment vehicles, including transparency, lower operational costs, and excellent liquidity

The intricate connection between the primary and secondary markets ensures fair pricing for investorsAs the capital market evolves and regulatory frameworks tighten, the difficulties for actively managed cap-funds to generate excess returns are likely to increase.

As observed by multiple sources, numerous fund companies have positioned index-based strategies as pivotal elements of their business modelsFor instance, Rongtong Fund has made a strategic commitment to aggressively pursue a primarily ETF-driven passive investment strategy, emphasizing the significance of ETFs in their operational framework.

In this era of fierce competition, smaller firms are continuing their pursuits in ETF offerings, like Xizang Dongcai Fund, a subsidiary of East Money Securities, which has already introduced several index-linked fundsTheir strategic positioning showcases the potential for newer entities to carve out their niches in the rapidly evolving ETF market.

However, establishing a sustainable ETF framework demands substantial resources

It is estimated that an ETF needs to reach around ¥20 billion in scale to break evenXizang Dongcai Fund's swift entrance into this market reflects its significant backing, enabling it to compete effectively.

In the face of fierce competition, the pivotal question remains: how to successfully differentiate in a crowded marketplace? Zhuan Junjie, head of Quantitative and Derivatives Investments at Penghua Fund, highlights that ETFs play an essential role in asset allocation, asserting that the transformation from a sell-side oriented service market to one increasingly focused on buy-side solutions will further elevate the importance of asset structure in investment strategies.

As the public fund management industry witnesses this surge in ETF emphasis, the prevailing sentiment among fund managers is that they stand at a pivotal moment—it is time to fully leverage the potential of ETFs.