China’s fund industry has gone through 24 years. The scale of public funds announced by the fund industry association in February 2022 reached 26.34 trillion yuan, a new high. The industry now has a huge professional team composed of nearly 3000 fund managers.
For a long time, the management ability of fund managers has been an important reference standard for selecting funds. For hundreds of millions of fund investors, the profession of public fund managers has always been full of mystery.
In the recent market turmoil, the short-term fluctuation of the net value of public funds has increased. Many star products that set a new high in net value last year have not been spared. Many have retreated, and the pressure on fund managers has increased sharply. In fact, from the historical data, the characteristics of large fluctuations in A-Shares are “difficult to win and easy to win” for fund managers. Under the phenomenon that fund managers “always win hard, always win easy”, the Chinese reporter of Securities Times securities firm tried to explore from multiple angles what kind of products can become the traffic password in the era of public offering?
rare “winning”
China’s public fund industry has gone through 24 years. At present, there are nearly 3000 fund managers in China’s public fund industry, managing 9491 public fund products, with a total scale of 26.34 trillion yuan (data of China Fund Industry Association in February 2022).
Among these numerous fund products, which have withstood market fluctuations? Which fund managers repay investors’ trust with steady performance?
According to the statistics of China reporters of securities times and securities companies, more than 400 fund products have made money every year in the past six years (20162021) (calculated separately), most of which are partial debt products with low return, while only three partial equity funds (the proportion of quarterly stock positions 50%) invest in a shares. One is the advantageous industry of BOCOM led by fund manager he Shuai, and the other two are hedge strategy funds.
According to the data, from 2016 to 2021, the advantageous industry funds of BOCOM reaped annual returns of 4.56%, 11.01%, 0.32%, 43.9%, 35.93% and 19.76% respectively, outperforming the CSI 300 index every year except 2017. In addition, the CSI 300 index fell by 11.28%, 25.31% and 5.2% in 2016, 2018 and 2021 respectively, while the stock position in the advantageous industries of BOCOM has been at the level of 70% for a long time. It is not easy for heavy equity funds to make profits every year in recent years.
When judging the market in 2022, he Shuai pointed out that the valuations of individual stocks are generally high in many industries with high future fundamental expectations; In other macroeconomic related industries, the market is worried about the economic growth in 2022. From the macro level, it is expected that the economic growth rate will be difficult to show a high growth rate in the future.
He stressed that the fund had bought some high-profile industries with more callback, but after the callback at the end of last year, he believed that in the next two to three years, its valuation level will soon enter the investable area, but it still does not have price advantage, so it can only participate in a small amount.
The market analysis of fund managers in this section, to a considerable extent, analyzes the characteristics of he Shuai and “Changsheng fund” – prudence and conservatism, which is precisely the reason why they are not paid attention to by the spotlight in the era of public offering flow, which is like the position of a low-key actor in the entertainment circle.
The data show that among the current fund managers, the average number of years of securities practice of fund managers is as high as 12.19 years, but the average number of years of service of fund managers is only 3.98 years, and the number of fund managers with more than 5 years of experience is less than 1000. Among the active partial equity funds, only more than 300 fund managers have worked on one product for more than 5 years.
The number of fund managers in China is close to 3000, the management experience of fund managers is still insufficient, and there are not many people who manage a single product for a long time, which may also be one of the reasons why it is difficult for fund managers to “win forever”.
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“winning player” is not the first-line top class
The Chinese reporter of Securities Times securities firm noted that he Shuai managed four fund products with a total asset scale of less than 20 billion. In terms of management scale, he Shuai was not conspicuous compared with major players. In addition, the advantageous industries of BOCOM managed by he Shuai have made profits every year for nearly six years, and their performance has been stable. Although they have reaped 35.93% and 19.76% respectively in the past two years, this is not the performance of popular star funds.
In fact, many fund managers already know what kind of performance and what kind of operation style can lead to the road of star fund managers.
“I’m giving up the opportunity to show my face. Investors have high requirements for the fund. In a narrow sense, it should refer to those who can rank in the top ten of the whole market when the market comes, or at least 70% – 80% of the performance in one year, but this requires risk.” A medium-sized public fund manager in Shenzhen admitted in an interview with the Chinese reporter of the securities times securities firm that if he wants to be a star fund manager, he has to take a lot of risks. His goal is to obtain a more stable income goal every year. Therefore, he also gives up radical high positions and high concentration strategically.
In other words, the pursuit of stable annual returns by fund managers is actually difficult to be widely remembered by investors. The “star fund managers” in the eyes of investors are still players who can bring amazing returns in a certain year. The characteristic of such players is to have aggressive operation style.
he Shuai, who has achieved positive returns for six consecutive years, is actually a relatively conservative player. He once said publicly that he had bought many excellent or mainstream companies at a relatively cheap position, but finally sold them early, resulting in not enjoying the stage of the highest profit. This also makes him earn without losing for six consecutive years, but his annual performance data is not high in the absolute sense
This is quite similar to Liu Jie, an alternative player of Ping An fund. Liu Jie has also caught some bull stocks, but Liu Jie’s admits that he does not love to embrace the stock bubble, although gambling may bring some amazing gains.
“Often the market or some sectors deduce to that stage, and it won’t be too far from adjustment.” Liu Jie stressed to reporters that the last bubble must be earned. It must be prepared for a heavy withdrawal. This deviates from his personal investment style and investment discipline. He does not plan to make himself a strong net offensive player.
In an interview with reporters, Liu Jie bluntly said that investors may easily remember to win aggressive fund managers in a certain year and take this as an indicator of “star fund managers”, but in fact, the fund strategy of pursuing stable income may be better from the perspective of long-term compound interest.
For example, if there are two fund managers in the market, the first fund manager earns 40% in the first year, retreats 20% in the second year, and the second fund manager earns 15% in the first year and 5% in the second year. In two years, the average return of the two fund managers is 10%, but in the long run, the return of the second fund manager will be much greater than that of the first fund manager, because the second fund manager has the effect of compound interest in income.
Obviously, for most retail investors, the “star fund manager” is the player who made 40% in the first year, not the fund manager who made only 15% in the first year.
stock short position wins, why is it difficult to become an online celebrity
To control risks, reduce income expectations and realize the stable but not too high income of the fund for many consecutive years is a “thankless” operation strategy to a considerable extent.
“On the one hand, it is difficult to make money every year. On the other hand, if the positive income is not high, the fund manager will also lack sufficient market appeal.” A person from a fund company in South China said bluntly that it is precisely because investors prefer fund managers with great flexibility that Changsheng funds with relatively low returns are often submerged in the noise of doubling their annual base.
Even the runner up of the whole market fund, if the annual performance is not “high”, it is difficult to catch fire, which also makes many fund managers more motivated to adopt the strategy of high position and high flexibility.
The Chinese reporter of the securities firm noted that a flexible allocation fund product in China won the runner up of the active partial stock fund in 2018, with a yield of 9.14%, killing a large number of star fund managers who operate with high stock positions in absolute performance.
How is this 9.14% achieved? According to the periodic report disclosed by the fund, the fund manager adopted the stock zero position strategy throughout 2018 and 2019, that is, the fund manager did not buy a share in the market. Taking the fund’s position in 2018 as an example, 93.19% of the assets were allocated in the bond field and 5.82% were allocated as bank deposits.
However, the fund runner up brought by zero stock position and the annual performance of 9.14% obviously lack sufficient attraction to investors, and the fund manager who won the runner up of the annual fund failed to be among the star fund managers.
In addition, although the fund increased its stock position to between 20% and 30% in 2020 and 2021, and the annual returns of the fund in 2017, 2018, 2019, 2020 and 2021 all achieved positive returns, which were 0.71%, 9.14%, 4.08%, 6.75% and 12.1% respectively.
This fund, which has made money for five consecutive years from 2017 to 2021, is obviously a “rare product”. However, due to the conservative strategy of low position, even if it has won the second place in the fund with zero stock position, it has failed to push the product into the list of star fund products.
Market participants believe that this is largely logical because, from the perspective of absolute value, it is difficult to meet the ultra-high requirements of ordinary investors for the performance elasticity of star funds. Although there is no deterministic quantitative index to explain what kind of annual performance can become the “Star” in the eyes of ordinary investors, it is obvious that the above-mentioned annual performance of up to 12% is difficult to impress the people who have been fed by high elasticity products.
Therefore, although this is a scarce product with long-term stable profits, it has failed to attract financial attention. According to the report disclosed by the fund, as of the end of December 2021, the total scale of this fund, which has maintained low position operation for a long time, is less than 1 billion yuan.
“It is difficult for low positions to be aggressive. Even if the income is relatively stable, or because of the low position of stocks in the falling market, it has a relatively limited attraction to Jimin.” A person from a fund company in Shenzhen believes that the aesthetic standard of most investors for star fund managers is actually the performance flexibility of high position operation.
high positions enhance the attraction of fund instrumentalization
Since the performance obtained by low positions is actually difficult to be generally recognized, fund managers are more motivated to adopt the operation mode of high positions for a long time.
The general manager of a fund company in South China frankly told the Chinese reporter of the securities firm that a great condition for the fund manager to become a star fund manager is the operation of high positions. Without the operation of high positions and high concentration, it is impossible to obtain ultra-high returns in the year when the market comes. Statistics also show that most star fund managers are normalized to maintain high position operation. Taking a star fund manager with great market appeal as an example, no matter how the market rises or falls and how the net value of the fund loses, he has maintained more than 90% of the stock position.
“We are also discussing whether this strategy of high position, high concentration, hard carrying and no position timing is easier to make products popular? Fund managers have selling points? Of course, they will bear some losses when they fall.” The general manager of the above fund company said frankly that perhaps the style change of the A-share market this year may explain some problems, that is, it is still necessary for fund managers to control their positions. Maintaining a high position in a normalized manner is equivalent to actively giving up the withdrawal control.
On the contrary, there are no more than 10 star fund managers who are widely remembered by investors and have market appeal, that is, stars of public offering flow, in the whole market, but none of them can meet the standard of annual profit. According to the observation of the ten traffic stars in the whole market selected by the reporter, the data show that these ten fund managers generally have large annual losses in the market in 2018. According to the public fund products managed by a traffic star in Shanghai, his annual loss in the market in 2018 was as high as 27%. However, when the market comes, these traffic stars often have extremely high aggressiveness in the flexibility of fund performance. Taking the fund manager with large losses as an example, he made more than 60% of the annual income in the A-share market in 2019.
In a sense, although Jimin also often complains about the “heartbroken performance” of traffic stars in loss years, many Jimin pay more attention to the offensive ability of these star fund managers in the bull market when choosing fund managers. In fact, Jimin’s attention to the withdrawal control of fund managers is far less sad than that of elasticity. Investors play down the relationship between the operation style of traffic stars and weak market losses.
On the other hand, fund managers also seem to want to use high positions and high concentration to turn themselves into instrumental products with distinctive styles, just like the role of index funds in overseas markets.
“Many fund managers prefer to use the mode of centralized investment in the industry track to turn themselves into a tool. The product characteristics managed by these fund managers are very obvious, that is, they focus on buying one or two industries.” A deputy general manager of a public fund in South China said frankly in an interview with a Chinese reporter of a securities firm that centralized shareholding and high stock position operation are easier to be remembered by customers, and of course, they are easier to be selected when customers buy the fund. There are more and more fund products. If there is no distinctive style, they often can not leave a significant impression on customers, which is also a reflection of the instrumentalization of the fund in China’s stock market.
The deputy general manager of the fund company stressed that the Chinese market is still an emerging market. The characteristic of the emerging market is active investment. The fund managers who invest actively still have obvious excess returns relative to the index, which makes many fund managers in China start to build their own managed active equity funds into products with instrumental tendency.
For example, he said, for example, only a fund product of Baijiu, an industry, customers will understand the risk and return attributes of the products very clearly, and they will be very instrumental. Investment in a wide range of industry wide market fund products is more a solution to investment, including the low return solid income products, which is also a solution to provide investors with low volatility and relatively stable returns. However, for many ordinary investors, this may not be easy to understand. The relatively low stable return makes it less attractive than some instrumental funds with high positions and concentrated positions.
“Changsheng” must endure great suffering
It is noteworthy that the strategy of high position operation has obviously achieved the long-term performance of many funds.
Since the establishment of the first public fund product in 1998, the Shanghai stock index has increased by 1.7 times and 10 times. Individual stocks can be found everywhere. The data show that there are more than 2600 doubled funds that have not been liquidated (calculated separately), and the number of funds with a maximum return of more than 10 times is as high as 79. There are 36 fund products with the highest return of more than 14 times in history. However, these “long-term winners” with excellent performance are actually traded for sacrificing phased pullbacks or enduring the downside risk caused by high positions.
Almost all of the above 36 “Changsheng players” operate in high positions. The data show that among the above Changsheng funds, the largest withdrawal of fund performance is as high as 65% and the average withdrawal is as high as 55%. In addition, seven products experienced the largest pullback in history in 2015, and 29 products experienced the largest pullback in history from 2007 to 2008. A total of 29 funds have experienced a halving, accounting for 80%, and the maximum pullback range is 32.77% – 67.86%. How long does the maximum pullback recovery time take? The data show that it takes an average of 3.95 years for the above 36 products to climb out of the pit with the largest withdrawal, 6.52 years for the highest and 0.67 years for the lowest
It is worth noting that the net value of the above fund products reached a record high after 2021, and then retreated to varying degrees, of which nearly 10 products retreated more than 30% since last year’s high.
According to choice, a total of 518 fund managers have doubled the best return of the current fund and achieved long-term success.
Zhu Shaoxing is the most special fund manager to achieve Changsheng. The rich country Tianhui selected growth a, which he has managed since 2005, has achieved a high return of 23.69 times in nearly 16 years. According to the data, since the establishment of Wells Fargo Tianhui select growth a, there are still four annual earnings that have been at a loss, including a decline of 47.28% in 2008, 25.36%, 15.28% and 26.96% in 2011, 2016 and 2018 respectively.
Looking back on the past, it can be seen that even the best fund managers can not escape a large pullback when they encounter a bear market. However, even if the pullback risk brought by high positions is so great, many fund managers are still happy to use high positions to operate on the way to “Changsheng fund”.
a fund manager in China who achieved amazing annual performance through high position and high concentration shareholding strategy also disclosed his understanding of high position and high concentration to reporters
“High positions bring ultra-high returns and will also have the same source of profit and loss.” He stressed that fund holders should be able to think clearly that the centralized holding of high positions will inevitably face high volatility risks. Therefore, he suggested that Jimin buy funds with spare money that is not used in the short term, because he does not consider short-term performance, is willing to tolerate short-term stock price fluctuations in investment, and will not significantly reduce positions due to the decline. Fund managers and Jimin are a two-way choice process, If Jimin is only willing to accept the high returns brought by high positions in a good market, but it is difficult to bear the high fluctuations of high positions in a weak market, he can also choose redemption. He will not choose the timing of positions due to changes in market style.
The above-mentioned people believe that not timing positions means that fund managers operating in high positions will bear the pullback risk caused by extreme market fluctuations. However, due to the longer cycle of performance return, fund managers are more likely to become long-term winners.
