Nearly 200 products, frequent failures in bank wealth management product fundraising

【Intro】Nearly 200 bank wealth management products fail to raise funds frequently

China Fund News reporter Li Shuchao Zhang Ling

Affected by mismatched supply and demand and product homogenization, since this year, bank wealth management products have repeatedly seen failed fund-raising, with closed-end fixed-income products becoming a “severe-hit area.”

Insiders say that the frequent failure of wealth management product fund-raising indicates that the bank wealth management market has entered a “buyers’ market” era. Against this backdrop, wealth management firms need to actively shift toward customer demand by improving product structure, strengthening investor support and follow-through, and establishing issuance evaluation mechanisms, among other approaches, to enhance product attractiveness.

194 wealth management products fail to raise funds during the year

Recently, multiple wealth management firms such as Huaxia Wealth Management and Guangyin Wealth Management issued announcements stating that due to the total fund-raising amount not reaching the minimum issuance size stipulated in the product prospectus, the issuance of the related products was terminated. Overall, the products that failed to issue were mostly closed-end fixed-income products, and the main reason for failure was that “the fund-raising size did not reach the minimum threshold.”

Data from a leading third-party research institution shows that as of March 25, the number of wealth management products that have failed to raise funds since the start of this year has reached 194 (calculated separately across different share classes), up 17.58% year over year.

“Against the backdrop of ‘deposit relocation,’ the increase in wealth management product fund-raising failures reflects a mismatch between investors’ risk preferences and product supply.” said Lou Feipeng, a researcher at Postal Savings Bank of China. As deposit interest rates fall, funds seek higher returns; combined with the recent volatility across multiple asset classes, bank wealth management yields also decline, making investors take a wait-and-see stance toward newly issued products.

Tian Lihui, a professor of finance at Tianjin University of Finance and Economics, believes that the rising number of wealth management product fund-raising failures reveals structural changes in where funds are flowing. The deeper reason is that wealth management firms are still issuing homogenized fixed-income products with a “scale-oriented” approach, while investors, after experiencing net asset value volatility, have formed a more rational judgment about the trade-off between returns and liquidity.

It is worth noting that among the wealth management products that failed to raise funds this year, most are closed-end fixed-income products.

In response, the Zhizhixinhong Wealth Management Research Institute said that in a market environment where interest rates are falling and volatility is intensifying, investors’ tolerance for the time their money is locked up has dropped significantly, and they are more inclined toward flexible allocation that can be accessed at any time. On the other hand, as bond yields continue to decline, the performance comparison benchmarks for newly issued closed-end fixed-income products have generally been lowered. Compared with deposit-like and cash management-type products over the same period, their yield advantage is no longer obvious, and in some cases even an inversion phenomenon occurs. “The dual disadvantages on both returns and liquidity lead investors to generally take a wait-and-see approach or avoid these products.”

The wealth management market shifts to a “buyers’ market” era

Insiders say that the increasing number of wealth management product fund-raising failures reflects a mismatch between market supply and demand, and changes in investors’ risk and liquidity preferences, signaling that the wealth management market is shifting from a seller-driven model to a “buyers’ market” era.

Lou Feipeng said that the growing number of wealth management product fund-raising failures is due to four main factors: first, it reflects a significant decline in investors’ risk appetite and a lower tolerance for net value volatility; second, the supply-demand structure of the wealth management market is imbalanced, products are highly homogenized, and they lack attractiveness; third, there are disagreements in the market about the prospects for economic recovery and interest rate trends, resulting in strong wait-and-see sentiment; fourth, wealth management firms’ product design and marketing strategies do not adapt to the new market environment, and relying solely on fixed-income products makes it difficult to meet diversified needs.

In Tian Lihui’s view, the above phenomena send a clear signal: the wealth management market has entered a “buyers’ market” era, and the past rough-and-ready model of “whatever products are issued, people buy them” has ended.

From Tian Lihui’s perspective, the increase in fund-raising failures is a concentrated manifestation of the supply-demand mismatch. Against the backdrop of net-value-based management being fully implemented and interest rates continuing to fall, investors’ return expectations for wealth management products are returning to rationality, while wealth management firms still have a misalignment in understanding customer needs. The ultimate determinant of the success rate of product issuance is how deeply wealth management firms understand and serve customers.

Looking ahead, wealth management firms need to shift from a “scale-oriented” approach to a “demand-oriented” one, making adjustments in three areas in terms of product planning: first, enrich the product lineup and increase the allocation of hybrid products, equity products, and “fixed-income plus” products; second, optimize the product maturity structure by adding flexible terms such as the shortest holding periods and periodic open-type designs to balance returns and liquidity; third, strengthen investment research and product management-driven capability, forming distinctive strengths in credit discovery, interest-rate cycle trading, and asset allocation.

To improve the success rate of product issuance, Lou Feipeng suggests that wealth management firms should adjust their product positioning: first, increase the supply of open-ended and short-term products to enhance liquidity and attractiveness; second, optimize “fixed-income plus” strategies by controlling equity exposure and volatility; third, strengthen investor education and transparently disclose how products operate and the associated risks; fourth, explore differentiated products, such as those linked to specific indices or theme investments, to meet the needs of segmented markets.

The Zhizhixinhong Wealth Management Research Institute believes that wealth management products need to shift from “channel-driven” to “customer-demand-driven.” First, reduce the issuance density of pure closed-end fixed-income products and optimize the maturity structure; second, vigorously develop “interest-bearing option included” (含权类) and “passive strategy” products; third, strengthen the “liquidity management” product line, with cash management-type, daily-open, and shortest-holding-period products as the main force for scale growth; fourth, pursue “targeted issuance” and establish a product pre-issuance assessment mechanism—combining channel feedback, customer holding structure, market interest rate trends, and other factors—to prudently set the minimum issuance size and performance benchmark; fifth, abandon the “ranking-chasing” mindset and return to a customer-interest-first principle.

Editor: Du Yan

Proofreader: Wang Yue

Production: Xiao Mo

Review: Xu Wen