“Don’t expect a fund manager to know everything!” Public offering investment research logic is being reshaped

Author: Xu Zhongjin

“Don’t expect a fund manager to know everything!” a senior executive of a public mutual fund company said during an industry survey recently.

Behind this is an emerging consensus in the public mutual fund industry: since the industry has already moved on from “celebrity fund managers,” since it has strengthened the role of performance benchmarks in constraining investment, and since it has emphasized team-based and platform-based research and investment structures, then on the investor side, people also want to reverse the old mindset and build a new logic: buying a fund means buying a product, and buying the investment capability behind that product.

On the fund company side, a transformation is also needed in parallel. Fund companies are becoming “human resources companies”—they need to assign the right fund manager to the right product, and assign the right fund product and fund manager to the right market environment…

“In the future, fund companies will need to combine and arrange fund managers and the investment capabilities behind them, which sets very high requirements for a fund company’s professionalism,” a fund company general manager said.

Fund manager changes have become the norm

Since this year began, amid a market characterized by extreme divergence, changes involving some well-known fund managers have drawn multi-angle “interpretations” from both the industry and investors.

On June 27, E Fund Management Co., Ltd. announced that two funds under Zhang Kun saw personnel adjustments—E Fund High-Quality Select increased the allocation by appointing Peng Ke as fund manager, and E Fund High-Quality Enterprises Three-Year Holding also increased the allocation by appointing Zhang Qi as fund manager. Previously, on May 23, E Fund Blue-Chip Select issued an announcement to appoint He Yicheng and Yang Siliang as additional fund managers. Tracing back, this was the first time that Zhang Kun’s solo management of this product over nearly eight years saw the arrival of a co-manager. After two additional appointments, among the four products managed by Zhang Kun, three have entered a “co-management” model.

The market has paid close attention to E Fund and Zhang Kun’s series of actions. E Fund Management said that appointing additional fund managers to fund products is to balance investment styles, leverage the advantages of complementarity across multiple perspectives, and optimize investors’ investment experience. As for attention to changes in the Zhang Kun series, it focuses on new situations faced by an experienced investment veteran: as a veteran investor with solid track records in areas such as consumer sectors, when dealing with an extreme-divergence market where it’s hard to achieve long-term advantages in certain segments, changes need to be made in a timely manner.

Should expectations be on fund managers to improve solo combat capability, or should they be on leveraging team combat advantages? E Fund chose the latter.

No exception. Invesco Great Wall Fund also has multiple fund managers entering a “co-management” model.

In June this year, Invesco Great Wall Fund announced that the veteran celebrity fund manager Yu Guang, who manages funds such as Invesco Great Wall Core Competitiveness, Invesco Great Wall Core Recruitment, and Invesco Great Wall Core Select One-Year Holding, appointed additional fund managers. With this, and with the appointment of a fund manager already made at the end of March for Invesco Great Wall Core Zhongjing One-Year Holding, Yu Guang no longer manages any public mutual fund products alone. Also in June, Invesco Great Wall Fund issued an announcement stating that Invesco Great Wall Jiying Growth Two-Year Periodic Open Hybrid would appoint a fund manager and be co-managed with Liu Yanchun. Adding the newly appointed fund managers announced earlier for Invesco Great Wall Dingyi, Invesco Great Wall Domestic Demand Growth, and Invesco Great Wall Domestic Demand Growth II, Liu Yanchun formed a portfolio arrangement of “4 co-managed funds + 2 independently managed funds” across 6 funds under management.

From this, it can be seen that Invesco Great Wall Fund has also chosen a transformation path that leverages team combat advantages. What is particularly interesting is that after the appointment of additional fund managers, the above fund products showed a favorable trend in performance during the period.

In addition to celebrity fund managers having new appointments and entering co-management for their managed products, since the beginning of this year, a large number of fund products have also seen changes in how they are managed.

Rather than expecting one person to go it alone it’s better to expect the right deployment

The effectiveness of the capital market is also reflected in the efficient screening of investment managers.

“Reality is cruel; a divergence market has become our test,” a fund manager focusing on traditional industries said.

For the new developments brought by market and investment changes, many fund managers are capable of understanding and accepting them. Of course, fund managers won’t belittle themselves. As one fund manager said, “Investing in traditional assets isn’t going to mean nothing grows.”

In fact, the public mutual fund industry has seen new changes in its aesthetics and standards for fund products and fund managers.

During a recent survey, the reporter found that the self-renewal pressure that market conditions bring to fund managers is a common issue among industry fund companies. In addition, the industry companies’ re-positioning and arranging of certain fund managers is also a situation faced by the industry as a whole. The public mutual fund industry expects to find a new balance through efforts from multiple sides.

Management personnel at one fund company believe that, against the backdrop of high-quality development in the industry, investors’ understanding of fund products and fund managers has been updated. They believe the public mutual fund industry has gradually moved away from the development misstep of “celebrity fund managers.” With new requirements such as performance benchmarks being emphasized, investors’ attention should return to fund products and the underlying research and investment behind them. Based on such investor understanding, “as long as the actions—such as appointing additional fund managers or replacing fund managers—are meant to help fund products better adapt to market changes and truly make money for investors, then these are natural things, and investors need not worry or be anxious about it.”

Another fund company’s head of research and investment told the reporter that after returning to a normal and reasonable perspective, the relationship between investors and fund managers can also change and improve to a large extent. “Previously, fund managers sold ‘personal brands,’ which was often not what they themselves wanted. If the industry can provide a fund manager with an objective recognition, then they can do better at what they’re good at, instead of being influenced by all kinds of factors outside investing,” the head of research and investment said.

Of course, the new situation also brings new pressure. When investors focus their investments on fund products, fund companies need to match the right fund managers with products and investors—this raises even higher requirements for a fund company’s professionalism.

“From what I’ve observed, top-tier big fund companies are already proactively making these attempts. If there is proactive selection and arrangement, there will be pressure for accountability and rights to be equal. How can a fund company accurately judge the market? How can it accurately define fund managers? How can it choose the right timing to replace people? As of now, no fund company dares to say it has strong capabilities in these aspects,” a head of the fund research department at a securities firm who declined to be named told the reporter.

Indeed, even though many things are still not fully connected in these new attempts, “since everyone is trying, you can find good solutions, and besides, this is also a clearly stated development direction for the industry,” the aforementioned fund company general manager said.

(Edited by Xu Nannan)

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