(Yicai) April 27 -- China’s fund of funds market grew 33 percent in the first quarter from a year earlier to a record high of almost CNY325 billion (USD47.6 billion) in assets, as investors rotated out of low-yield savings in search of higher returns.

Most of that growth came from new product launches, according to data from financial services provider China International Capital Corporation. Fifty-three new public FOFs were launched in the three months ended March 31, excluding four pension FOFs converted from existing products, issuing a total of 68.9 billion shares.

At the end of last month, there were 591 public FOFs in the market, a 10 percent increase from the previous quarter, per CICC’s figures.

A FOF is an investment vehicle that pools capital to invest in a portfolio of other investment funds -- such as mutual funds, hedge funds, or private equity funds -- rather than directly in stocks, bonds, or securities, thereby offering investors access to a broader range of assets.

At the same time, the fundraising period for public FOFs has shrunk amid stronger investor appetite. Those set up so far this year took only 9.28 days on average to raise capital, almost half the 17.52 days it took last year, according to financial data platform Wind. At least 10 sold out on the first day.

Against a backdrop of falling interest rates, the appeal of traditional bank savings products has waned and people are seeking higher-yielding alternatives.

A report from ‌state-owned China Wealth Asset Management Registry and Custody said that banks’ wealth management assets fell by CNY1.38 trillion (USD202 billion) to CNY31.91 trillion (USD4.68 trillion) in the first quarter. Data from the People’s Bank of China, the central bank, showed that household deposits rose just CNY7.68 trillion in the quarter, down CNY1.54 trillion on the same period of last year.

The head of the wealth management department at one bank told Yicai that deposits lack sufficient appeal, equity investments carry too much risk, while FOFs sit exactly in the middle. But it remains to be seen whether they retain their popularity once the capital shift is completed.

Many FOFs have similar strategies and limited ways to differentiate themselves, industry insiders said, and if a decline in performance sparks a run of redemptions on short-term products, it could lead to severe volatility.

Editor: Tom Litting