Public Fund of Funds Scale Grows Over 3 Times Within the Year, Banks Are the "Main Driver"

Log in to Sina Finance App and search for [Information Disclosure] to see more evaluation levels.

In the context of a persistently low interest rate environment, public fund of funds (FOF) is becoming one of the most active sales products through bank channels. This year, the issuance of new FOFs has accelerated in tandem with the pace of new launches. In the first three months alone (up to March 23), the total number of new FOFs and the amount raised have both seen significant growth, with several products raising over 5 billion yuan in a single day. “Sunlight Funds” are frequently seen, with banks playing a dominant role.

Industry insiders believe that banks are shifting from merely being “distribution channels” for FOFs to becoming “asset allocation hubs.” This change is closely related to banks’ operational pressures and is driven by the rapid transfer of funds amid the “deposit relocation” trend. Under this trend, a large amount of low-risk preference capital is expected to flow into relatively better-performing hybrid debt-oriented FOF products.

New product launches have increased more than threefold year-over-year

Wind data shows that as of March 23, this year, 44 new FOF products have been launched across the market, with a total fundraising of over 65.125 billion yuan, nearly 3.6 times the 14.147 billion yuan raised in the same period last year. On average, each product’s fundraising amount has increased from 884 million yuan last year to 1.48 billion yuan.

The pace of issuance for individual products has clearly accelerated. In early March, E Fund’s Ruyi Yingze 6-month holding period FOF completed its fundraising on the first day, reaching nearly 3.5 billion yuan, becoming the 10th “Sunlight Fund” of the year. Previously, multiple FOFs broke the 5 billion yuan mark in a single day, including Bosera Yingtai Zhenxuan 6-month holding FOF, which raised over 5.8 billion yuan in one day, with more than 20,000 effective subscriptions.

In terms of market scale, FOF funds have also seen substantial growth. As of March 23, the total size of public FOFs reached 288.514 billion yuan, nearly doubling from 148.255 billion yuan last year.

A wealth management manager at a joint-stock bank told reporters: “This year, clients’ tolerance for volatility has decreased significantly, but they still expect returns. Pure deposits are no longer attractive, and they are hesitant to heavily allocate to equities. FOFs are just right in the middle.”

From the perspective of custody and issuance structure, banks hold a clear dominant position. Among the FOF products launched this year, 19 institutions are involved in custody, with 15 being banks, including China Merchants Bank, Bank of Communications, Ping An Bank, China Guangfa Bank, Postal Savings Bank, China Everbright Bank, and Suzhou Bank. China Merchants Bank leads with over 20 billion yuan in custody assets, accounting for about 40% of the year’s issuance scale.

Specifically, China Merchants Bank, China Construction Bank, and Bank of China have successively launched “Changying Plan,” “Longying Plan,” and “Huitou Plan,” using FOF as a core tool to provide clients with one-stop asset allocation solutions.

“Previously, we recommended fund managers; now, we recommend portfolio schemes,” said a public fund FOF manager. “Banks want to front-load asset allocation capabilities, while fund companies are more responsible for managing the underlying assets.”

Banks shifting from “distribution channels” to “asset allocation hubs”

This change is closely related to banks’ operational pressures. As net interest margins continue to narrow, the importance of intermediary business income is increasing. Since FOFs tend to have longer holding periods and relatively stable scales, they are viewed as more sustainable sources of income.

A senior wealth management officer at a large bank said: “Relying solely on subscription fees and trailing commissions is no longer sustainable. Customers are increasingly concerned about the holding experience. FOFs help smooth net value fluctuations and reduce complaints, which is crucial for channels.”

Meanwhile, bank performance evaluation systems are also evolving. The aforementioned officer noted that in recent years, the weight of customer complaint rates in the assessment of financial managers has increased. Customer experience related to product volatility has become an important focus at the channel level. Compared to this, FOFs, with their diversified underlying assets and smoother net value fluctuations, better meet the channel’s demand for “stability.”

“This capital isn’t actively seeking high-risk assets but is passively leaving deposits,” said a securities analyst. “In the current environment where the equity market hasn’t fully recovered, funds need a lower-volatility, slightly higher-yield destination, and FOFs are just meeting this need.”

From the demand side, the trend of “passive migration” of funds is accelerating. Several institutions estimate that by 2026, the scale of residents’ fixed-term deposits maturing will be about 75 trillion yuan, with one-year and above deposits totaling approximately 67 trillion yuan. Under the continuous decline in interest rates, the one-year fixed deposit rate at mainstream banks has fallen below 1.5%, with some products even lower.

CICC analyst Hu Jicong believes that FOF products, with their nested structure and ability to “solve the selection difficulty of funds,” are inherently more suited to individual investors’ needs. In the current environment of low interest rates and accelerated deposit relocation, debt-oriented hybrid FOFs, as a “fixed income plus” category with relatively strong performance in 2025, are expected to attract more low-risk preference capital.

Hu Jicong predicts that a large amount of low-risk preference capital will flow into “moderate-yield, risk-controlled” fixed income plus funds. Among these, relatively better-performing debt hybrid FOFs are likely to continue attracting this segment of funds, driving the continued expansion of the fixed income plus FOF scale.

Multiple constraints of capability, sales, and perception

Industry insiders believe that, unlike the previous trend where active equity funds dominated with “hot products,” the current FOF boom mainly features products with medium to low risk, short holding periods, and diversified assets, primarily targeting stable capital from bank channels.

From a product design perspective, most of the hot FOFs are debt-oriented hybrids, with equity positions generally controlled between 5% and 30%. They are based on bonds, supplemented with dividend-paying low-volatility stocks, gold ETFs, and some overseas assets. Holding periods are mostly three or six months, balancing liquidity and returns.

“A key concern for clients is: Will I lose a lot of money? When can I access my funds?” said a bank relationship manager. “Products with a three-month holding period are easier to explain and more acceptable.”

However, as the scale rapidly expands, the FOF market also faces multiple risks.

First, there is a mismatch between research capabilities and scale growth. “Over the past two years, FOF scale nearly doubled, but the cross-asset research teams capable of multi-asset allocation haven’t expanded proportionally. Except for top-tier institutions, many small and medium-sized firms’ strategies have become homogeneous, mainly focusing on ‘bond-based + dividend low-volatility’ portfolios,” said an industry insider from East China. “In stable market conditions, these strategies don’t differ much; but once market structure changes, performance gaps could widen quickly, creating uncertainty for investors.”

Second, sales-driven factors remain significant. Some industry experts point out that the current FOF popularity heavily depends on the sales rhythm and product promotion mechanisms of banks, rather than genuine investor demand. With insufficient information disclosure and investor education, some funds may be entered without full understanding of the products. “If the market experiences a phase of decline, redemption pressures could surge, amplifying volatility,” said the insider.

Additionally, some institutions emphasize the “short lock-in period” as a liquidity advantage during actual sales, leading some investors to view these products as cash management tools. This could result in investors having insufficient capacity to tolerate product fluctuations, further increasing market volatility and redemption pressures.