It’s likely that a large portion of the recent increase in Chinese mutual funds’ assets can be attributed to younger investors—people born since 1980 make up about 40% of the population. More than half of the 20 million new fund investors as of August last year in China were under the age of 30, according to a report (link in Chinese) by Shanghai-based Mob Tech, a research firm. In general, these investors prefer funds to stocks and properties, according to a report (link in Chinese) released in January on the behavior of Chinese stock investors by Tencent Securities, a financial news portal under the namesake tech giant.

“We do see a growing interest among young users in fund investment on Alipay. In 2020, over 50% of new fund investors on our platform were born after 1990,” Liang Jingrui, vice general manager in charge of fund partnership at Ant Group, which owns China’s dominant mobile payment app Alipay that brokers financial products, told Quartz. On average, China’s Gen Z start investing two years after they start working, compared to 10 years for their parents’ generation, according to a 2019 report (link in Chinese) by Alipay and China Institute of New Economy, and Liang said over 60% of the young investors held their position in the funds for more than one year in 2020.

One of the reasons for youngsters to choose funds is because it is a “cheaper way” to have exposure to stocks, especially expensive ones, according to Alexander of Z-Ben.

“Rather than spending hundreds if not thousands of yuan to buy stocks like [alcohol maker]Kweichow Moutai, you can buy funds [that have invested in the company] with one yuan,” he told Quartz. Moutai, the most valuable stock listed in mainland China, has a stock price that’s around now $331, and is a key component of the portfolios of several mutual funds, including two managed by Zhang.

And because of the mobile payments revolution, it’s pretty simple for people to put money into funds, wrote Chinese financial blogger Song Jianwei. Unlike their parents who could only purchase funds through banks, anyone can now do so with a few clicks on online platforms, which also provide information on different products and offer transaction fees that are lower than banks, Song wrote.

Alipay, especially, has become an essential platform for younger adults to manage their finances.

“In previous years I mostly deposited my money with banks while just spending the rest of it. But around three years ago, I started noticing that there are so many investment options on Alipay, which has lowered the threshold for investing,”said Beijing-based Echo Kou. For many people like Kou, Alipay’s money market fund Yu’e Bao, which allows individuals to put in as little as $0.15 is the beginning of their investment journey. Yu’e Bao now has over 600 million users, compared to over 1 billion for Alipay in China.

For 29-year-old Charlene Cong, funds offer a way to diversify from her other investments. “I am a believer in professional investment management, and I trust the ability of active fund managers, who can generate excess return in a market rally and mitigate risks in a market downturn,” she said. Cong has allocated 40% of her money on funds, 30% in insurance, and the rest in stocks.

The fandom investors display toward asset managers, naturally, is a reflection of their fund performance—one of Zhang’s funds delivered nearly 700% returns over eight years. Although Zhang has maintained a low profile despite the interest in him, some managers and their companies have responded to the interest by using social media to engage with new investors. For example, many have started introducing new funds in online live streams that give viewers access to purchase the products directly from their phones

Fresh leek?

Even during China’s most important family holiday this year—Lunar New Year eve, when families get together for a big meal—over 600,000 people (link in Chinese) watched finance-related live streams on Alipay. The frenzy around investing has even extended to non-finance platforms like video streaming website Bilibili, where some make-up vloggers have begun making videos talking about their investment experiences.

“I bought my first fund recently because it was so trending that I could even see people talk about it on lifestyle apps,” said Xiao Wei Huhu, a blogger and university student in a vlog.

Several commenters praised her for taking charge of her personal finances at a young age. But some worry whether this the investing social media space, and the obsession with finance influencers and star managers, could lead to irrational herd investment decisions.

Ran Cai Jing, a Chinese financial media outlet, compared Gen Z investors to “leeks waiting to be harvested” by finance bloggers, some of whom charge fund investors for joining fan groups they run. Since leeks grow quickly and can be harvested repeatedly, it’s become slang used to reference investors without sufficient financial knowledge who can easily be drawn into speculative trading.

“If youngsters don’t study the companies, industries, and products and only chase returns or short-term trends, then funds could also disappoint them one day,” the outlet wrote in a recent article about the frenzy in mutual funds.

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