“The wind always blows away”. It took only ten years from the approval of the first group of fund companies to the dissolution and cancellation of the first fund subsidiary.
And this may just be the beginning. Securities Times reporter learned from the industry that there are many fund subsidiaries whose business has been suspended, and a number of fund subsidiaries will start the cancellation process in the future. The fund sub industry, which once flourished, is now facing difficulties in developing its business, with the scale shrinking from 11 trillion to 2.3 trillion; Many of the practitioners who were once high spirited chose to turn around and leave.
How to break the game? It is a major issue facing many foundations. Under the regulatory requirements of de channeling and strict control of non-standard, they have constantly explored new business models and made many attempts to transform to active management, such as equity investment, private fof / mom, ABS, etc. Some insiders believe that in the future, the fund subsidiaries may be in full bloom and vary in thousands of ways. Although they are all called Jijin, the business model is completely different, which will be very rare in all financial institutions.
from soaring to the first cancellation
Recently, Bairui Aijian asset management (Shanghai) Co., Ltd. (hereinafter referred to as Bairui Aijian asset) issued an announcement to cancel the record, bringing the industry that has not been paid attention to for a long time back to people’s vision.
The cancellation of the first fund subsidiary, although slightly sudden, is not without trace. In fact, the scale of the fund subsidiary industry has continued to decline for 21 consecutive quarters. By the end of the fourth quarter of 2021, the total scale of the industry was only 2.3 trillion. At the end of the third quarter of 2016, the total scale of the fund subsidiary’s industry wide asset management had exceeded 11 trillion, and now the scale has shrunk by nearly 80% compared with the historical peak.
The scale data of the top 20 subsidiaries of the fund began to decline in an earlier quarter. At the end of the third quarter of 2016, the scale of 9 of the top 20 gold companies declined. The total scale of the top 20 was 7.2 trillion, a decrease of 154.1 billion yuan compared with the previous quarter. By the end of the fourth quarter of 2021, the scale of the top 20 is only about 2 trillion. However, in the reshuffle of this industry, the concentration rate of the top 20 has increased from 64.8% at the end of the third quarter of 2016 to 86.1% at the end of the fourth quarter of 2021.
It is worth mentioning that the top 20 are still dominated by a “banking” fund subsidiary. By the end of the fourth quarter of 2021, 7 of the top 10 banks were “banking systems”. The top five CCB capital, China Merchants wealth, Shanghai Pudong Bank AXA, ICBC Credit Suisse and ABC Huili are all “banking systems”, with scales of 267197 billion yuan, 244674 billion yuan, 178.01 billion yuan, 156124 billion yuan and 143447 billion yuan respectively. However, this is different from the scale in the peak period. Five years ago, the scale of the top five exceeded 500 billion yuan. At present, the scale of CCB capital and investment wealth, which are still in the forefront, has also shrunk by nearly two-thirds compared with the past.
Some insiders said that the “banking” fund subsidiary can be said to be a “success channel and failure channel”. At the initial development of the industry, the “banking” fund subsidiary developed rapidly in the channel business because it was backed by bank shareholders. After the tightening of supervision, its impact was limited for the first time. In the past, many related businesses disappeared, resulting in a rapid decline in scale. However, at present, the “banking” fund subsidiary can still take the lead in the existing scale. It also benefits from the channel background of bank shareholders, which provides convenient conditions for its development of new business.
from universal artifact to exhibition difficulty
From 11 trillion flowers to 2 trillion prosperity, from universal artifacts to exhibition difficulties, what happened to the fund?
If a subsidiary company is approved by the CSRC to set up its fund management business in October 2012, it can return to the fund management company within 10 months before the issuance of the fund management license of the CSRC; In November of the same year, the first batch of fund subsidiaries received the approval.
In order to encourage financial innovation, the early fund subsidiaries experienced a period of “savage growth”. Their special account business broke through many constraints of traditional trust, bank financial management and insurance asset management. With a wide range of investment and flexible operation rules, it is regarded as a “universal artifact” for the rapid expansion of asset management scale. At that time, there was a saying in the industry that “banks do not do trust and trust do not do foundation”. Some projects that do not meet the risk control requirements of commercial banks mostly choose the foundation gold as the capital channel.
This makes the fund subsidiary quickly become the new favorite of many financiers, among which the channel business is the most popular. According to the statistics of France consulting finance, at least 70% of the 11 trillion asset management scale of the special account of fund subsidiaries in 2016 was channel business. According to this proportion, the scale of channel business of fund subsidiaries reached about 7.7 trillion yuan.
However, the extensive development will eventually lay hidden dangers. In the bear market of 2015, mines began to explode gradually, and many base gold companies had risk events such as default of special accounts and inability to repay funds after channel loans; What is more difficult is that once the mine explodes, the weak capital strength of the fund subsidiary is often difficult to reveal.
As a result, since 2016, the regulatory review of fund subsidiaries has become more stringent, and not only a number of fund subsidiaries that violated regulations were notified and dealt with in April, In addition, the regulations on the management of subsidiaries of fund management companies and the Interim Provisions on the management of risk control indicators of asset management subsidiaries of specific customers of fund management companies (hereinafter referred to as the “new regulations of fund subsidiaries”) were officially issued in December to implement the risk indicator management system with net capital constraint as the core for the subsidiaries of special fund accounts. Since then, the net cost of sub channels has been restricted and the net cost of sub channels has been increased.
“But in fact, going to the channel is only the first domino to push down the fund. After the new regulations in 2016, many Jijin companies have also begun to actively transform their business to active management. We have also made many attempts, but we have never found a particularly large development direction.” The general manager of a fund subsidiary told the securities times.
On the one hand, the new regulations of the fund subsidiary explicitly prohibit the horizontal competition between the parent and subsidiary companies, which means that the fund subsidiary has been limited in the active management of standardized products; Under the situation of strict control of non-standard under the new regulations on asset management, non-standard financing businesses such as consumer finance, real estate financing and supply chain finance have also been gradually rectified. The once “universal artifact” seems to be difficult to develop.
Some people in Jijin also call the transformation after 2016 as “secondary entrepreneurship”, and the business model, personnel structure and business ideas need to be readjusted. Due to the setback of transformation and sluggish development, many core talents have also been lost, making the fund subsidiaries worse.
“Finance is a licensed industry. Banks are credit and securities are sponsors. What is the positioning of funds? Where is the core competitiveness? This may be a problem that the whole industry needs to think about.” There are fund sub stakeholders said.
from savage growth to intensive cultivation
after experiencing the pain of transformation, where should the fund go? Insiders said that at present, there are four ways in line with the regulatory direction, which is also the main business direction of the transformation of fund subsidiaries:
First, equity investment, participation in PE, M & A, new third board and other businesses.
Take China Europe Shengshi Asset Management Co., Ltd. as an example, which has participated in the investment of Trina Solar Co.Ltd(688599) and other new energy companies; However, GP headedness is very serious. Compared with professional equity investment institutions, fund subsidiaries are still “industry recruits”.
The second is private fof / mom, that is, looking for excellent private funds for allocation, or inviting private fund managers to be investment advisers, which belongs to the business that the public funds of the parent company cannot do. At present, some fund subsidiaries have laid out neutral strategy or index enhanced fof products with risk exposure, and some fund subsidiaries have tried to issue active long strategy private placement fof that packs multiple star private placement.
The third is the public offering REITs, as well as the extended ABS businesses such as REITs and CMBS and the equity investment business based on pre REITs. For example, last year, Fuguo’s first water REIT issuance was established with Fuguo fund as the fund manager and Fuguo assets, a subsidiary of Fuguo fund, as the special plan manager. Among them, Fuguo assets took the lead in the declaration, issuance and listing of the project; However, the implementation of public offering REITs is not easy. It often takes a long time period from asset selection and scheme determination to submission to regulatory approval for issuance, so the fund is also doing some more front-end business.
Fourth, the business that the parent company does not do. Under the regulatory requirements of avoiding horizontal competition, some parent and subsidiary companies will negotiate to do some business division. For example, China Merchants Fund will leave all the fixed income special account business to the subsidiary’s investment wealth, and Hua’an fund will transfer the fixed increase business to the subsidiary’s Hua’an future assets, etc.
In addition, some sub funds have continued and upgraded the traditional standardized investment business of the fund company. For example, Wells Fargo asset has built a diversified asset allocation product of “standard + non-standard”, which can not only buy standard bond investment, but also hold the income certificate and trust products of securities companies, and use the correlation of different assets to re characterize the characteristics of portfolio risk and income. This kind of business not only follows the regulatory restrictions on the horizontal competition of parent and subsidiary companies, but also forms an independent investment style of subsidiaries.
“The fund subsidiary is indeed going through a relatively difficult period. After the shock adjustment period of the industry, the fund subsidiary is changing from savage growth to intensive cultivation. Whether it can accurately locate and find out the characteristic business in line with its own endowment is the key to the survival of the subsidiary. Some things can only see hope if it persists.” The person in charge of a fund subsidiary told the securities times.
