(Original title: Improving equity investment capabilities, fund companies upgrade and transform investment research systems)

Source: China Fund News

Original title: Improving equity investment capabilities Are fund companies upgrading and transforming their investment research systems?

Hot-selling funds led by star fund managers appear frequently, public offerings are intensively deployed to open equity funds within three years, and many public offerings have extended the assessment period for active funds... With the release of the long-term performance of outstanding equity funds, public equity management capabilities are highly sought after by investors.

Focusing on improving equity investment capabilities, this year, whether it is a large-scale public offering with an equity management scale of over 100 billion, or a small and medium-sized fund company with an equity scale of only a few billion, they are committed to transforming and upgrading the investment research system to create better investment performance and match the balanced development of fund management scale and performance.

Ten billion-level public offerings:

Scale expansion drives upgrading of the investment research system

Since 2017, the influence of the public offering market with strong active management capabilities has become increasingly prominent. Many medium-sized public offerings have also focused on building their own active management capabilities to upgrade and transform the company's investment research system.

A manager of a medium-sized public equity fund in Beijing said that in terms of the fund manager’s active management capabilities, when managing a fund of less than 3 billion yuan, he can obtain good investment returns by holding relatively certain stocks and conducting fast transactions. However, if the current management scale exceeds 10 billion, he needs to allocate researchers in consumer, emerging, financial, real estate and other major categories to strengthen teamwork. At the same time, he can obtain excess returns by reducing turnover rates and focusing on industry segment opportunities rather than individual stock opportunities. "When the scale is less than 3 billion yuan, fund managers can adopt a 'self-employed' approach to management. As the fund scale continues to grow, fund companies must work as a team to expand the management boundaries of fund managers. Therefore, when medium-sized public offerings transform into large-scale public offerings, the investment research system must be systematically upgraded and transformed."

In response to the continuous expansion of management scale, some companies have made relatively mature explorations in expanding the boundaries of fund managers' capabilities and upgrading the investment research system.

An executive of a public equity fund in Beijing with over 10 billion in equity said that since this year, the company has successively established more than a dozen investment research groups with complementary styles and in-depth research. Through full communication within and outside the groups and cross-verification by the research department, the company's active management capabilities have been overall improved.

According to him, the adjusted investment research system has four characteristics: First, the company's investment committee will not interfere too much with the investment research team, and specific decisions on investment research will be delegated to the investment research team; second, researchers and fund managers with different backgrounds and different research fields will be matched to form an investment research team with complementary styles, comprehensive research, and in-depth communication. In-depth research on securities investment; third, the investment research group conducts screening and discussion on various industries in the stock market. More than ten groups basically cover various views of the entire market, and strengthens the in-depth research through full exchanges; fourth, based on the investment research group, the company's research department then conducts analysis and research on heavily held stocks, and improves the probability and relative certainty of investment success through cross-validation at the two levels of the investment research group and the research department.

“We are committed to creating excess returns and obtaining market alpha through in-depth research. As long as we thoroughly research the company, fund managers will have the confidence to hold shares during the sharp fluctuations in the stock market, hold on to stocks, and use in-depth research to solve the volatility problem in investment.” He said that after the company’s investment research system was overhauled, a large number of outstanding fund managers grew rapidly, and fund performance improved significantly., laying a good foundation for the investment research team to create long-term performance.

Hundreds of billion-level public offerings:

Vigorously expand the index fund product line

Ten-billion equity public offerings put pressure on upgrading the investment research system, while large-scale public offerings with hundreds of billions of equity scale pay more attention to the development of index funds in terms of equity management capabilities.

Whether it is Harvest Fund’s launch of the Super ETF brand, China Asset Management’s layout of blue chip and growth ETF products, or E Fund’s index product fee reduction measures, leading public funds have been strengthening the competitiveness of passive index funds since this year.

A large public equity executive in Beijing believes that leading fund companies have increased their index fund deployment this year because they have seen long-term opportunities in the field of index investment. Leading companies have different service methods and customer positioning, and index investment still has great potential; compared with overseas markets, the domestic index market has a lot of room for improvement in both size and proportion.

Jing Lei, general manager of Harvest Fund, once wrote an article pointing out that from the supply side, the asset management industry will show a "spindle" structural trend: large asset management institutions with scale advantages can develop into platform companies, while smaller asset management institutions can win with "high-quality products"; from the perspective of customers on the demand side, investors have become smarter.

Jing Lei said, “The biggest feature of the Super ETF brand launched by Harvest Fund is that it is no longer driven by traditional factors, but is all driven by ideas. What needs to be constantly tried is to bring together various ideas. For example, value investing, fundamental value, moat theory, GARP investment, etc. can all be part of Harvest Fund Super The ideological source of ETF. ”

Small and medium-sized public funds:

Improving competitiveness in segmented fields

In addition to leading public funds committed to expanding their equity management capabilities, some small and medium-sized public funds also rely on the small and medium-sized characteristics of their products to increase investment returns and strive to create high-quality products.

The deputy general manager of a medium-sized public equity fund in Beijing said that as the scale of large-scale public equity management and equity funds grows larger and larger, the overall market performance becomes closer and closer to the market index, and performance returns to the mean and continues to become mediocre. Pursuing pure beta or smart beta in equity investment has become an inevitable option for these companies, and this also provides space for small and medium-sized companies to adopt a "high-quality" strategy and give full play to their own investment research characteristics.

In his view, as various resources are gradually concentrated in leading companies, small and medium-sized companies need to focus on building and implementing investment research systems, and take the "high-quality" route with outstanding investment performance in subdivided fields. Through talent training and system construction, his company will refine the investment process, improve the investment system, strengthen research support for investment, and drive scale development with performance.

In terms of specific methods, he introduced that the first is to organize cross-department industry groups to grasp the transmission rules of upstream and downstream industries based on macro strategies and improve the forward-lookingness of research; the second is to strengthen the interaction between industry researchers and predict industry development and industry chain investment opportunities through macro indicators; the third is to require fund managers to guide and participate in all research work based on the fund manager’s research background and personal interests.

“We encourage communication and exchanges between groups, strengthen the ability to transform investment research results among fund managers and researchers, improve the level of research investment, enhance the competitiveness of investment research in subdivided fields, and strive to have a place in the asset management market in the future.” He said.