Mutual funds operated by overseas institutions to invest in yuan-backed securities beat their Chinese counterparts last month as many heavyweight stocks staged impressive gains, an industry report said over the weekend.

The average return on investment hit 4.90 percent in October for 11 funds managed by overseas financial firms under the Qualified Foreign Institutional Investor, or QFII, scheme, said Lipper, a Reuters fund-research unit, in a monthly report.

That compared with a 3.67 percent return for equity-invested funds operated by domestic money managers, the report said. China's yuan-denominated securities are open to domestic investors and qualified foreign institutional investors (QFIIs), which trade on behalf of overseas clients via mutual funds.

"Compared with domestic funds, QFII products tend to focus more on blue chips and under-valued shares," Zhou Liang, Lipper's China researcher, said in the report. "The market spotlight's shift (to large-cap firms) helped QFIIs catch up with local fund firms."

China's benchmark Shanghai Composite Index rose 4.90 percent last month, extending its year-to-date climb to 62.2 percent. The SSE 50 Index, which covers the bourse' top 50 listed firms by market value, added 6.99 percent for the month ended October 31.

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