In the process of residents’ wealth growth demand turning to net worth products, private fof (fund in fund) has great development potential. Especially in the recent volatile market environment, fof has attracted more attention from the market because of its richer investment tools and more diversified strategic portfolio.
In this regard, Lin Qingyun, senior investment manager of snowball asset management, said in an interview with reporters that under the current market environment, it is recommended to adopt the configuration mode of multi asset and multi strategy, and simultaneously layout the equity market and commodity market through private fof. He also mentioned that with the official implementation of the “new regulations on asset management”, various products corresponding to the previous “capital pool” have withdrawn from the market, and customers’ demand for such products can be met by low wave balanced fof products.
talk about macro market: the market environment is complex and severe, and it is suggested to allocate multiple assets
Securities Times reporter: how to view the macro environment of the current market and what impact does it have on investment?
Lin Qingyun: the current macro environment is undoubtedly complex, severe and rapidly changing. Since the subprime mortgage crisis in the United States in 2008, the world has entered a post crisis era. The governments of various countries did not solve the crisis, but delayed the crisis by releasing water, and all countries did not find a good way out. To alleviate this crisis, we can find new economic growth points through a new scientific and technological revolution. Globally, China has done better because China’s economy is in a stage of steady growth through Internet application innovation and supply side reform. From the perspective of China’s financial market, the equity market has begun to adjust since last year (2021), but in the long run, China’s economy is moving from high-speed growth to high-quality development. Since the bull market began last year, the bond market has been in the process of adjustment and shock in the first quarter of this year. The subsequent superposition of China US interest rate spread upside down and broad credit expectation is expected to continue to fluctuate.
The commodity market is expected to rise in the long run. If we look at the Nanhua commodity index in the wind data, we can find that it continued to decline before 2015. After the supply side reform in 2015, the supply and demand situation has been reversed and entered a period of continuous rise. Demand is higher than supply outside China. In terms of capacity increase, it is difficult at present. Both the demand for carbon emission reduction and the concept of ESG reduce the willingness of the supplier to expand, because it often takes two or three years and a lot of capital investment to expand capacity and add new mines. If faced with policy pressure, such as the US Senate discussing the imposition of windfall profits tax on oil enterprises, the supplier tends to maintain capacity, The current high level of commodities can also protect its profits. In addition, various black swan events generally only lead to shutdown and production reduction, and it is difficult to have accidents leading to sudden production increase.
In the short and medium term, commodity prices have been greatly affected by the conflict between Russia and Ukraine this year, and there is full room for growth expectations. However, the battlefield situation changes rapidly. If the situation reverses, the commodity market will also reverse in the medium and short term. Therefore, under the current market situation, I suggest adopting the method of multi asset allocation and holding CTA at the same time, that is, the combination of commodity market and equity market.
Securities Times reporter: what kind of commodities and equity assets have more opportunities this year?
Lin Qingyun: commodities are internationally priced products, such as copper, oil and coal, which are essential for the industry of various countries. In addition, due to the conflict between Russia and Ukraine, Shenzhen Agricultural Products Group Co.Ltd(000061) this year may also usher in an increase, but in fact, their increase is often reflected in prices. Instead, the next trend is to prevent a sudden reversal of the battlefield situation, leading to a sudden decline in the whole market.
Historically speaking, the whole equity market is now in a historically low position, whether from the perspective of PE (price earnings ratio) or Pb (price to book ratio). We made a simple analysis and used the reciprocal of PE as the average return of the equity market and 10-year Treasury bonds to make a comparison. According to the wind data, the difference between the two is 75% of the historical quantile. It can be seen that after a long decline, the short power in the market has been brought into full play. Specifically, the whole market is still playing the concept of steady growth this year, so the recent performance of the steady growth sectors such as machinery, coal and real estate is good. In the long run, the electronic sectors such as chips also have investment opportunities.
talk about fof Investment: good fof products should be consistent with customer needs
Securities Times reporter: what is the investment style of fof products you manage? What is your idea about the underlying product screening of private fof?
I think fof is a variety of investment tools at the bottom, and it can also be expressed in various forms. The most important thing is to match the needs of customers. At this time point (the market fluctuates at the beginning of 2022), if the customer has no special requirements, I personally prefer the style of low wave equilibrium. After the “new regulations on asset management” in 2017, the previous non-standard products, or various products corresponding to the capital pool, were eliminated due to regulatory factors, but in fact, the customer demand for such products has not decreased, and the market gap needs to be filled.
The fof product with low wave equilibrium, its underlying assets and non-standard capital pool are in fact completely different.
In fact, when screening sub funds for fof products, we should first screen them according to different sub strategies. Because the whole risk and return attributes of different sub strategies are completely different. For example, the return rate of neutral strategy and arbitrage strategy is lower than that of equity bull strategy, but the same volatility is also small, so different strategies may have to be looked at separately.
From the perspective of quantitative indicators, we will pay more attention to the historical performance, actual return level, pullback range and sotino ratio of private placement products. This ratio means that the excess return is divided by the following line volatility, so that we can know how much return each unit’s downward volatility can bring. We still try our best to find private equity funds in the top 30% of the market, which will make a better contribution to our whole underlying products.
In addition to quantitative indicators, we will also analyze a series of qualitative indicators, such as the professional background of the whole team members and the stability of the team. In addition, more importantly, whether the strategy of the team is consistent with the strategic objectives of our whole product, we will conduct more in-depth communication with the manager through field research. At the same time, we also need to analyze whether his so-called strategies can continue to be effective in the future market environment.
Securities Times reporter: from the perspective of investors, what kind of product is a good fof product?
Lin Qingyun: fof is an asset management tool that can flexibly meet the needs of customers. Good fof products can be said to be products that match the needs of customers. If from the perspective of ordinary investors, the demand is roughly decentralized asset allocation, so as to reduce the volatility as much as possible. At the same time, it can also obtain certain benefits through the selection of bottom managers α profit.
The most preliminary evaluation method is to analyze its sharp ratio, that is, how much excess return can be generated by each unit of total risk compared with the risk-free interest rate. Generally, it is good to be more than 1, and more than 2 is a good product.
To be more precise, the sotino ratio can be used, that is, the unit income that can be obtained for each unit of downward fluctuation; Or intuitively, use the karma ratio to divide the excess return by the maximum pullback, that is, the risk of the maximum pullback corresponding to the excess return. Furthermore, if we can know the performance benchmark representing the income level of the equity market, such as the CSI 300 and the CSI 500, we can also compare them to find that α profit. The above are quantitative and qualitative standards. We also need to analyze whether its risk control system is complete and whether its strategy matches its own needs.
talk about investment philosophy: “win by positive harmony and win by surprise” to obtain average income in the market
Securities Times reporter: what are your investment experiences over the years? How do you balance return and withdrawal in your investment?
Lin Qingyun: as for my investment experience, I appreciate the saying in Sun Tzu’s art of war that “win by positive harmony”, “win by positive harmony”, that is, in the front battlefield, we must deal with it with normal plans to obtain the average income in a market; “Win by surprise” means that if you want to do better than the market, you must be able to take out some positions to grab the excess return in the market. “Positive sum” corresponds to the market β Effect, “win by surprise” corresponds to α effect.
When allocating, we need to consider the relationship between the pullback brought by volatility and the expected return. Because people are emotional, it is easy to sell at a low point and buy at a high point under impulse, so I pay more attention to the control of pullback, especially the medium and long-term pullback. Generally speaking, I think if customers who hold for one year can earn 12%, I will generally control the pullback to 6%. Of course, it does not rule out the possibility of loss in extreme cases. If this extreme situation is the impact of accidental factors in the short term, there is a great probability that it can recover in the short term; If it is a long-term environmental impact, there are generally obvious macro events, which can reduce the exposure of the equity market and reduce the pullback in the process.
Securities Times reporter: how do you do a good job in post investment management?
Lin Qingyun: post investment management is a focus of fof investment. In order to manage fof well, it is more important to focus on peacetime.
First, we will continuously monitor the underlying products, track their performance, and conduct performance attribution and risk evaluation; Of course, we will also analyze the performance attribution and risk at the fof level. For example, a long equity product originally focused on the growth track, but in fact, although its recent performance is very good, the performance of the growth track in the whole market is not good. We will pay attention to whether there is a strategic shift. If the strategy shifts to another strategy, we should consider reducing its risk exposure, because there may be an unbalanced relationship between the sub strategies of fof.
Second, we will regularly communicate the investment progress with the bottom managers. In case of unstable performance and changes in market risks, we will also communicate with the bottom managers, market views and response plans. Explore what kind of problems have occurred, whether it involves the complete failure of the strategy, or just a short fluctuation in the market. If it is only a short fluctuation, we will continue to pay attention. If its strategy fails, we will also consider reducing its risk exposure. Third, we will always pay attention to whether there is a need to adjust strategies in the macro environment, financial markets and regulatory policies.
In the above three aspects, if risks are found, the exposure shall be adjusted in time; In addition, if the fof fails to meet the performance expectations within the medium term, we will also review whether the product strategy is suitable for the current market and whether there is room for improvement.
