"But the government is expected keep a close watch over the level of market liquidity," Liu said. "Except for CUAM, which manages a total of 10 billion yuan in assets, the other four approved funds are managed by relatively small companies," said Liu.

Over 20 other funds are still awaiting regulatory approval.

In January, all fund classifications showed increased profits. Qualified foreign institutional investor (QFII) funds outperformed other funds, with an average return of 17 percent, higher than that of equity funds and mixed-asset funds.

QFII funds have a total of $4.5 billion in capital, according to the latest statistics from Lipper, a Reuters company.

Thanks to the booming stock market, equity funds continued to lead the increase with a 15 percent gain in January. Mixed-asset funds followed, rising 14 percent, while mix-asset flexible funds climbed 12 percent.

The Shanghai Stock Exchange Index Fund Index rose 2.67 percent yesterday to close at 2260.72.

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