yumyummegaways| Solving the dilemma of product homogenization public funds need "vital innovation"

The differentiation and characteristic Development of Public offering fundsYumyummegawaysTo some extent, it is the innovation and development of fund products.

At present, the variety of fund has been greatly rich, and the main body of the company is also more diverse. with the improvement of financial risk control and the stricter regulatory situation, the practice space of fund product innovation has been significantly narrowed than in the past. In this context, how do fund companies find the path of product innovation? How to avoid falling into the trap of "pseudo-innovation"?

Homogenization is overwhelming.

Innovation is imperative

In recent years, with the great development of domestic capital market, compared with this, the pace of innovation of fund products has slowed down. An important performance is that fund products are becoming more and more homogenized under accelerated new issues. whether it is active rights and interests, fixed income, or ETF, pension FOF, they are all faced with troubles such as "not growing up", "not doing well" and "accelerating mini".

So far, in the whole market 1YumyummegawaysAmong the more than 10,000 funds, mini-funds with a size of less than 50 million yuan account for about 10 per cent. Since the beginning of this year, a large number of mini-funds have been liquidated in early warning, many of which come from sub-new ETF and sub-new active equity products established in the second half of 2023, and even some products established in early 2024. In addition, with the continuous increase in quantity, the naming of fund products is becoming more and more similar, and high-frequency words such as "value", "growth", "innovation", "return", "industry", "trend", "cycle", "optimization" and "competitiveness" are often mixed in disorder.

The industry also admits that homogenization can no longer be underestimated, and expects real innovation to "break through the ground".

According to the latest data disclosed by the China Securities Industry Association, by the first quarter of 2024, the number of public offering fund products has reached 11602, and there is indeed a convergence of investment styles and investment strategies of some products, but this is a necessary process of market competition, and will eventually precipitate high-quality products that best meet the needs of the market. This phenomenon will also further urge fund companies to enhance their competitiveness through product innovation and differentiation strategies, so as to avoid the low effectiveness of homogenization. " Castrol Fund told the Securities Times.

Huaxia Fund also said that in recent years, the rapid development of the domestic fund market, the increment has reached a certain extent, so that there is homogenization in some product segments. But there may be no need to worry too much. On the one hand, with the gradual normalization of the fund exit mechanism, highly homogeneous products without resources, performance and characteristics will be eliminated, and the number of fund products will eventually reach a critical equilibrium state. On the other hand, with the continuous enrichment of product types and forms, new entrants will eventually integrate into the competition. While the scale of the fund continues to grow, the exploration of product types and structures will tend to be balanced with the market demand and maturity.

Zhang Bin, deputy director of the product research and development department of Chuangjin Hexin Fund, also holds a similar view. He told the Securities Times: "homogenization is a topic that has always been discussed in the fund industry, and the large number of products is really easy to dazzle investors and have no way to start." However, the fund product is only a carrier, the carrier can be homogeneous, but the investment strategy and investment performance are not necessarily homogeneous. The most important issue of product innovation is how to improve the holding experience of investors. "

"We believe that we can not simply use the two dimensions of product quantity and fund size to reflect the development of the fund industry, but to look at the changes in the quality of the fund industry through these quantitative labels." The Ping an Fund told the Securities Times that in recent years, the investment categories of fund assets have been continuously enriched, gradually expanding from traditional domestic rights and interests and bonds to commodities, infrastructure and overseas markets. Among them, equity funds have developed from market-wide actively managed products to theme, industry, style and strategic equity products, and bond funds have also been subdivided intoYumyummegawaysShort-term debt, medium-and long-term credit debt, interest rate debt, fixed income plus and other products, "of course, from the needs of investors and compared with overseas markets in two dimensions, there is still a lot of room for domestic fund product innovation."

Innovation should have "vitality"

In the context of high-quality development, the layout of a new round of product innovation will become an important starting point for the fund industry to achieve differentiated and characteristic development. However, what concept should be followed in fund product innovation? Where is the path of innovation? In this regard, the fund companies interviewed carried out an analysis from multiple dimensions, such as historical experience for reference, fund classification standards and so on.

Taking history as a mirror, we can know the rise and fall. Huaxia Fund divides the product innovation of the public equity fund industry in the past 26 years into four stages:

The first is the initial stage of development.Yumyummegaways.0 Innovation stage (1998-2008). Open-end index funds, money market funds, ETF, LOF, QDII and other products came out at this stage. Most of the product innovation is "crossing the river by feeling the stones". The supporting construction of various fund companies in investment management, system construction, business construction and other aspects played an important role in promoting the initial product innovation.

The second is the era of 2.0 innovation that seeks to break the situation (2009-2012). Huaxia Fund mentioned that in 2010, the balance of domestic household savings deposits reached 30 trillion yuan for the first time, but affected by the aftermath of the financial crisis, the capital market was calm and the fund industry was slightly lonely. In order to convert savings into investment and attract overseas funds, fund companies have increased their investment in product innovation, and the fund industry has ushered in the second wave of product innovation upsurge. Innovative products emerged during this period, including cross-border ETF, indexed bond funds and so on.

The third is the 3.0innovation era of transformation and evolution (2013-2015). During this period, the official operation of the Shanghai-Hong Kong Stock Connect, the capital market ushered in a new round of market, hit the new, mixed reform of state-owned enterprises and other theme funds were born. In addition, there are also products such as North-South Mutual recognition Fund and Shanghai-Hong Kong Stock Connect ETF on the market.

Fourth, the reform and improvement of the 4.0 innovation era (from 2016 to the present). According to Huaxia Fund observation, the product innovation in this period, compared with the past, the layout direction is more precise, the product structure is more complex, by targeted to meet the asset allocation needs of some investors to seize the market. Innovative products include public offering FOF, pension FOF, and ETF focusing on commodity futures and science and technology 50 areas, as well as related products such as Beijing Stock Exchange, China Unicom, floating rate funds, infrastructure REITs and so on.

In retrospect, good innovation can bring good returns to early investors, thus promoting the development and prosperity of the market. It is for this reason that public offering funds continue to carry out product innovation. " Wang Qunhang, director and deputy general manager of Baijia Fund, analyzed to the Securities Times that the innovation of fund products is neutral and conforms to the two major principles of "improving investment experience and increasing investment income" under the premise of legal compliance, which is a good and vital innovation. These two principles are not only the core indicators for judging innovation, but also help to prevent innovation for the sake of innovation and innovation for the sake of showing off technology. For example, the graded funds (especially B shares) that have appeared in history deviate from the nature of asset management, turn the fund into a game tool, and finally be abandoned by the market. " Wang Qunhang said.

Li Yiming, a senior analyst at the Morningstar (China) Fund Research Center, told the Securities Times that good fund product innovation is first of all oriented to meet the needs of investors; secondly, fund companies should firmly grasp the product quality. only by controlling investment risks and making long-term performance can we get the support of investors. "in the past few years, we have seen that some theme funds that have followed suit have brought losses to investors after the hot spots in the market have receded. It is worth pondering whether such innovation is sustainable and worthy of encouragement."

Yuan Yulai, founder and CEO of the Rubik's Cube, put forward three kinds of innovation paths in an interview with the Securities Times, namely, investment experience innovation, product category innovation, and fund managers' research ability and incentive mechanism innovation. "Public offering funds are a good underlying category for asset allocation, but the category is relatively monotonous at present, and a wider range of global asset classes should be introduced in the future."

As for more specific innovation, the Tianxiang Investment Fund Evaluation and Research Center told the Securities Times that the innovation of public offering fund products can be carried out around investment scope, investment strategy and product structure. In terms of investment scope, fund companies can try to cover a variety of innovative asset classes and enhance the highlights of their products from the source; in terms of investment strategies, fund companies should adopt more diversified strategies to enhance product competitiveness and investor holding experience; in product structure, the content of innovation includes fee structure, operation mode and so on.

Pay attention to practical feasibility

Exploration and innovation in three aspects

Under the guidance of the above innovative ideas and paths, how can fund companies find feasible innovative practices? This is more valuable and more difficult. In the current context, fund companies need to be "game breakers" in innovation practice if they want to be the "corner overtakers" in the next round of development of the industry.

First of all, it is necessary to distinguish different subjects. Ping an Fund believes that large fund companies can choose a full-product model or strengthen the leading edge of certain assets and strategies, while small fund companies can focus on very subdivided areas and achieve extreme or industry leadership in this field. At the same time, we should also see that there are risks in product innovation, including whether fund companies conduct in-depth research on certain types of assets, whether they can fully recognize the risks of this asset class and be prepared to deal with extreme situations. In addition, the customer experience of fund products is highly dependent on changes in the capital market, and some innovative products may take a long time to wait for appropriate market opportunities.

The Tianxiang Investment Fund Evaluation and Research Center said that under the background of the homogenization of public offering funds, the public offering of asset management departments of some securities firms can rely on their diversified research on different asset classes to achieve professional investment. to provide investors with more professional and effective investment allocation strategies. On the other hand, banks are public offerings, which can focus on the development of robust product strategies by virtue of their capital advantages and fixed income investment management advantages. In addition, for some small and medium-sized fund companies, the smaller management scale may make their investment strategies more flexible and can initially produce products that outperform market performance and create "small and sophisticated" flagship products.

Secondly, there are different forms of products. At present, ETF, MOM (Manager among managers), REITs and other products have been concerned by the industry.

According to Castrol Fund, product innovation in recent years mainly revolves around the major strategic development direction of the country and the transformation of economic structure, such as REITs, ESG funds, floating rate funds, and so on. Future product innovation will further focus on enabling the real economy, promoting the entry of long-term funds into the market, and serving the diversified needs of customers.

Zhang Bin believes that ETF is one of the iconic innovative products in the current fund industry, which has driven the growth of equity funds as a tool product, while MOM product innovation belongs to the innovation of investment operation mode, through a number of sub-managers of different styles to carry out investment under the guidance of managers, creating a multi-style investment portfolio for investors. He also mentioned a detail to the Securities Times reporter: "during the MOM planning period of Chuangjin Hexin Fund, we visited many colleagues and heard the most sentence: 'MOM is an innovation of the industry, which is expected to bring different experiences to investors, and we are happy to support it.' this also reflects the industry's attention to the feelings of investors and the pursuit of product innovation."

In addition, the investment scope of the new fund is also worth exploring and innovating. Wang Qunhang said that he and Baijia Fund are trying to explore an innovation related to FOF and ETF. "the investment scope of FOF should be further optimized, refined or diversified, either all public funds or a specific collection of funds, such as ETF." In his long-term fund product research, Wang Qunhang found that if FOF products only invest in ETF (including stock ETF, bond ETF and even cross-border, commodity ETF), it will be closer to the two principles of "improving investment experience and increasing investment return".

"FOF products that only invest in ETF, such as hybrid and bond products, have more room for adjusting the allocation of risky assets and more pre-arranged allocation strategy space for low-risk assets. The essence of ETF is index investment, but the liquidity will be better under the arbitrage mechanism, whether buying or selling, the impact cost of the secondary market is very small. When the market is good, the increase in the index may not be comparable to that of the leading stocks, but as long as the pullback is controlled and the holding period is lengthened, the cumulative earnings are likely to reach investors' expectations. " Wang Qunhang said.

The innovation chain is relatively long.

The peripheral factors should work together.

Product innovation is based on the ecological behavior of the fund industry and even the whole asset management industry, which not only needs the guidance of innovation principles and paths, but also needs the coordination of market demand, brand channels, investor education and so on.

Zhang Bin said that the innovation of fund products also involves innovation promotion, fund sales, investor education and so on. "funds are professional financial products, and the content publicity of product innovation will decline in the sales link. Investors only know the sales information and may not realize what innovative products can bring to him, which will lead investors to have a vague understanding of innovative products and eventually choose to wait and see. " Zhang Bin believes that the innovation of fund products also needs to vigorously promote the development of fund investment business based on the perspective of investors to recommend products, and solve the problem of "choosing a good fund suitable for the market style from many funds", so as to be accepted by investors.

CICC Fund believes that the innovation of fund products should consider the issue of "whether it has long-term allocation value" at the beginning of the product's establishment, and should not be traded for short-term hotspots. In addition, we must optimize product expenses and cost structure, and do a good job in product investment and education. "Especially for quantitative index products with strong instrumental attributes, investors must fully understand what the product is, what to invest in, and how to use it."

"Product revenue and customer experience are very important to product innovation, and this is also the starting point for driving product innovation." Ping An Fund believes that based on customers 'diversification of product revenue and experience needs, product innovation must be able to distinguish and accurately describe customers' revenue and experience needs, and develop targeted products. In addition, we must sell suitable products to the right customers on the sales side, let customers fully understand the characteristics of the products through marketing, publicity, companionship and other methods, and strive to achieve fund investment, sales and other behaviors in terms of fund company assessment and incentive design. In line with the original intention of product design.

Huaxia Fund specifically mentioned that under the previous seller's sales model, wealth management institutions were accustomed to introducing fund items with obvious excess returns in the past, positioning them as "hot money" for key recommendations, and realizing customer introduction and cultivation while selling products. "This model is simple and easy to implement, but it is easy to bring higher investment turnover rates and poor investment experience. Under the buyer's investment model, sales organizations should gradually abandon the sales and incentive model with 'short-term medium-term revenue' as the core, and change to a multi-level charging model that adapts to customer needs scenarios, and focuses on increasing the stock, from 'what to absorb gold and match what to match what to lack "to help investors customize their own asset allocation plans on the basis of asset allocation will become an important service means."

In Harvest Fund's view, fund product innovation also includes selling good products to suitable investors, so that investors can see through, understand, and operate easily. This needs to be achieved through technological application innovation, such as improving the efficiency and security of fund operations through artificial intelligence, big data, etc., using technological innovation to improve investors 'holding experience, and improving sales efficiency and customer service quality.

Yuan Yulai also said that at present, the investment and application of information technology and artificial intelligence in the public fund field is relatively weak. Many fund products are still continuing to use the traditional "betting track" model, and their long-term performance is unstable, which makes investors have a poor holding experience. In addition, the current mainstream incentive mechanism for public funds is linked to size, net value rise and fall, and performance ranking. Fund investment easily ignores the impact of industry fluctuations on investors 'earnings, which is not conducive to investors' long-term holding of funds.

Against the background of a new round of innovation in fund products, Yuan Yulai believes that the incentive mechanism of fund companies should be considered in three aspects-can the incentive mechanism be considered linked to the actual profits of investors who purchase the fund? Can you consider evaluating the risk fluctuations of the fund? Can performance incentives be more prominent for fund managers with long-term stable performance?

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