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【Mutual Recognition Funds】Morgan North-South Fund Attracts 86.7 Billion Yuan in Assets; Long-Win Fund's Breakthrough Relies on Two Key Moves
Morningstar recently released an analysis report on Hong Kong’s mutual recognition funds (known as Northbound funds in Hong Kong) for February. Last month was still “peaceful,” with no escalation of Middle Eastern crises causing oil prices to surge. Market speculation about US interest rate cuts benefited global stock markets, and Northbound capital continued to favor stocks over bonds. Morgan, with its “Morgan Asian Dividend Fund” as a growth engine, has been attracting continuous inflows of 6.448 billion RMB for two consecutive months, bringing its managed assets to over 86.7 billion USD, maintaining its top position.
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Morningstar states that the “Morgan Asian Dividend Fund” aims to achieve a portfolio return exceeding its benchmark: the MSCI All Country Asia ex Japan Net Return Index by 30 percentage points. Its 2025 returns have already outperformed similar funds (Asia ex Japan dividend stocks), stable low-volatility strategies, and high-dividend strategies, continuing to attract investors.
As for HSBC, ranked second in total assets, Morningstar notes that it experienced two consecutive months of capital outflows, causing its total assets to fall below 30 billion RMB, widening the gap with Morgan, the leader.
Morningstar reports HSBC Northbound Fund’s total assets fell below 30 billion RMB
However, Morgan also faces strong competitors. Swiss Pictet continues to dominate as the only hybrid product, “Pictet Strategic Income Fund,” which has been a bestseller since Q4 last year, surpassing East Asia Unicom in assets and ranking 4th.
Morningstar data shows that as of the end of February, the total managed assets of 12 Northbound fund companies are:
In the February Hong Kong mutual recognition fund monthly report by Wu Yuening of Morningstar (China), titled “Continued Divergence in Capital Flows,” it is noted that overall market saw net capital inflows last month, but internally, the structure was highly polarized: equity and hybrid funds continued to attract capital, while bond funds experienced outflows.
Pictet Strategic Income Fund attracted 8 billion RMB in two months
Among various products, the hybrid funds continue to show strong inflows, with Pictet Strategic Income leading, net inflow of 3.27 billion RMB in February, totaling 8.024 billion RMB this year. By flexibly allocating global equities and fixed income, its performance over the past year has significantly outperformed similar dollar-denominated flexible funds, earning investor favor.
Additionally, Asian equity and bond hybrid strategies performed steadily. HSBC Asia Multi-Asset High Income Fund attracted 675 million RMB, and Schroder Asia High Yield Equity & Bond Fund attracted 516 million RMB, ranking fourth and fifth in monthly net inflows.
Top inflow funds in February (Morningstar data as of end-February, top 10 by net cash flow):
Last month, Morgan’s Asian Dividend and Pacific Technology funds led the inflows
Regarding equity funds, high-dividend strategies and sector-themed funds became the main allocation focus, driven by expectations of declining interest rates and increased market volatility. The defensive nature and cash flow advantages of high-dividend strategies attracted investors. The “Morgan Asian Dividend Fund,” focusing on high-dividend stocks in Asia ex Japan, with its low volatility and steady income features, continued to attract long-term capital, with a net inflow of 2.539 billion RMB in February, ranking second in monthly inflows.
The “Harvest High Income Stock Fund” also ranked seventh, focusing on stable dividend-paying stocks with strong cash flows and low debt in leading industries, based on the MSCI Asia ex Japan index.
In sector funds, “Morgan Pacific Technology Fund,” as the only tech sector fund, benefited from the global tech stock rebound and the rising industry chain of AI, with a net inflow of 464 million RMB in February, ranking sixth in monthly net inflows.
BOC Hong Kong All-Weather Asia Bond Fund reopened and attracted new inflows but temporarily suspended subscriptions
In contrast, bond funds continued to see net outflows. Most bond funds are restricted in sales to Hong Kong mutual recognition fund investors or only open to certain types of investors, limiting mainland capital inflows.
Meanwhile, market risk appetite increased, prompting some funds to shift toward equities, putting pressure on international and Asian bond funds. Asian bond funds, such as HSBC Asian Bonds, HSBC High Yield Bonds, HSBC High Income Bonds, and Morgan Asian Total Return Bond Fund, experienced ongoing outflows, becoming the most capital-exited mutual recognition funds this year.
However, BOC Hong Kong All-Weather Asian Bond Fund bucked the trend, attracting 690 million RMB in the past month, ranking third in net inflows. After resuming mainland subscription on January 27, it quickly attracted capital, but since February 5, it has again suspended mainland subscriptions and resumed related services on March 11.
Bond fund outflows and HSBC Northbound fund’s first two months net outflow of 2.4 billion RMB
Looking at the top fund companies, in the first two months of the year, capital continued to flow into Pictet and Morgan, with Pictet’s flagship hybrid product, “Pictet Strategic Income Fund,” maintaining its strong inflow position.
Morgan’s equity and bond products showed clear divergence in capital flows, but overall, Morgan still maintains industry-leading attractiveness.
Additionally, East Asia Unicom’s equity and fixed income products both attracted significant inflows, ranking first among large fund flows this year. Conversely, HSBC’s continued bond outflows dragged down its overall performance.
Top two months’ most capital-absorbing companies (Morningstar net cash flow ranking from early 2026 to end-February):
In summary, Morgan’s mutual recognition fund assets reach 86.76 billion RMB, holding over 40% of the market share, maintaining its industry-leading position. HSBC and Harvest follow in second and third place, each with assets over 20 billion RMB.
“King of inflows” in early 2026 saw significant outflows in the first two months
Among mid-tier players, Pictet, East Asia Unicom, Schroders, and Huaxia Fund have solidified their market positions through differentiated strategies, with all mutual recognition funds exceeding 10 billion RMB in assets, continuously enhancing product competitiveness.
Morgan’s global bond fund, the only global bond mutual recognition fund in Hong Kong, saw a sudden shift in risk appetite, with outflows of 3.144 billion RMB as market risk perception changed from bonds to equities. However, overall, market expectations suggest that in March, Northbound capital risk appetite may reverse sharply due to a Gulf crisis, increasing demand for safe-haven assets and making bond funds market favorites again.
Looking back at 2025, Morgan’s flagship funds attracted a total of 13 billion RMB, making it the “most inflow” fund among Northbound funds since its launch 10 years ago, with a total net inflow of 22.6 billion RMB in 2025, ranking first among all fund companies.
Since New Year’s Day last year, the cap on mainland investors’ sales proportion of Hong Kong mutual recognition funds was raised from 50% to 80% of total assets. This policy change, combined with mainland investors’ demand for diversified overseas allocations, led to a surge in Northbound fund purchases; however, it is expected that this small spring market will not be repeated this year.
Morningstar adds that the cash flow and fund size data used in the above statistics are at the fund level. The State Administration of Foreign Exchange has not yet officially released February’s Northbound and Southbound fund data.