To counter rising redemptions, a number of domestic open-ended funds opted to pay out large dividends, or split their fund units to lower the net asset value, or price, per unit.

Fortune SGAM Fund Management split the units of one of its funds Monday, lowering the net asset value to 1 yuan per unit from more than 2.4 yuan as of Wednesday.

The dividend payouts were a factor behind a recent increase in volatility in the A-share market as funds sold down their portfolios to raise money for the payments.

After the payouts, which lowered the net asset value of their fund units, they brought in new fund investors and quickly bought back shares they had just sold, fund managers said.

The manoeuvre hurt the performance of some funds that had to pay higher prices for the shares they bought back, analysts said, although fund industry executives said they had no choice, to protect the size of their funds.

"What else can we do? We have to understand the needs of our customers," said Li Jianguo, vice chairman and chief executive officer of Fullgoal Fund Management Co, a joint venture with Canada's Bank of Montreal.

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