The global financial crisis wiped out more than 1.5 trillion yuan in face value of 424 funds managed by 60 investment firms in 2008, data compiled by a leading investment research company has revealed.

The biggest losers were those funds that had invested in the domestic stock market, TX Investment Consulting stated.

Qualified domestic institutional investors (QDII), which invest in overseas stock markets, fared no better, posting a combined loss of 50.5 billion yuan last year, the research firm said.

Wang Minghui, a 35-year-old software engineer working in a Beijing-based IT company, said he lost more than 60 percent (at least on paper), of his US$90,000 in savings that he invested in QDII funds. Blaming himself for his naivety, Wang said: "I am frustrated, to say the least."

Investment experts and stock analysts said global financial markets continue to remain choppy and advised domestic investors to be cautious while investing their money overseas. The domestic capital market too was not a safe haven, some analysts said, even though local stock indices have fared well of late.

"I don't suggest investing in stock-oriented funds this year because of its high risks and market uncertainties amid the financial meltdown," said a fund manager with China Jianyin Investment Securities.

Bond funds, which invest in corporate bonds and government bonds, are more stable and will yield 5 percent per annum, he said. Cash funds, which invest in fixed-return portfolios with short maturities, will also preserve the principal and earn a modest return, although the yield would be quite low, he pointed out.

In 2008, bond funds and money market funds were the only bright spots in the overall investment gloom, posting a profit of 9.3 billion yuan and 5.9 billion yuan, respectively, TX Investment Consulting said.

The investment report revealed that the five worst performing fund management firms were Huaxia, Boshi, eFunds Management, Jiashi and Nanfang. Funds under their management lost an aggregate of more than 80 billion yuan in 2008.

Indeed, many Chinese investors had already deserted the fund market in droves last year. The number of individual fund accounts at the end of 2008 fell by 20 percent from a year earlier.

Many investors were stunned by the huge losses of their stock investment. Some investors even expressed doubt about the latest stock market rally, and said they would rather keep their money in banks this year than invest it in stocks.

However, Yang Jie, a manager of Bank of Communications, recommended stock-oriented funds as she expects the stock market to rally further on the strength of the country's economic stimulus plans. "It's a good time to invest now for long-term investors," she said.

What seemed to have irked some investors was that the huge losses didn't seem to have affected the 2008 income of fund management companies, which rose by an average of 8.28 percent from a year before, to 30.7 billion yuan, according to TX Investment Consulting.

The findings of a fund manager capability survey by Sohu.com last month revealed that 80 percent of the respondents were disappointed at the lack of professionalism of fund managers, who were widely blamed for their failure to fully inform them of the risks associated with the products they sold. There were also indications that some managers actively misled potential investors.

"To better protect the long-term interests of fund holders, better regulation and oversight would be required," said Wang Lianzhou, executive director of the editorial committee of China's Securities Investment Funds Yearbook.

(China Daily April 21, 2009)