-Strong institutional flows drive mutual fund profit growth
-Product strategy is shifting to cater to this demand
-Sticky AUM should lead to more stable dividend payments for foreign partners

Update: The release of China’s mutual fund industry annual results paints a bright picture. Based on Z-Ben Advisors’ calculations, profit margins averaged 28.9% in 2015, up from 25.0% a year ago. The vast majority of JV FMCs posted a net profit, contributing to the increasing dividend payments that foreign shareholders received. The two key drivers of profitability were the equity market rally between 3Q14 and 2Q15 and continued institutional flows into public mutual funds, particularly fixed income. We believe that this should continue in 2016 as not only insurers reallocate assets, but also as new sources of capital enter the industry.

The investor composition of public mutual funds has shifted significantly within the space of a year. In 2014, institutions represented only…