Delayed Launch of "Rights-Included" Funds Tests Sales Patience
During the bottoming phase of the domestic equity market, the issuance of "equity-included" funds (funds with equity assets in their portfolios) has overall slowed down. However, China Securities Journal reporters have noticed that some "equity-included" funds, which had previously postponed their fundraising, have recently started to issue intensively.
Industry insiders have informed the reporter that some fund companies have chosen to delay the fundraising of "equity-included" funds. On one hand, this is due to the previous low sentiment, which made channel sales difficult and led to continuous postponement of the issuance schedule. On the other hand, fund companies and distribution channels also hope to wait for the market to warm up and market sentiment to improve before launching their products. With the Federal Reserve's interest rate cut taking effect, funds are expected to continue flowing into A-shares. Industry insiders believe that many industries have already stabilized at the bottom, and perhaps the market's recovery is just around the corner.
Products with delayed fundraising are being sold one after another.
Previously, the domestic equity market continued to bottom out, and in the public market, especially for actively managed "equity-included" funds, the overall pace of issuance has slowed down.
Taking mixed funds as an example, Wind data shows that as of September 19th, the number of funds issued this year is 200, a sharp decrease compared to 275 in the same period of 2023 and 395 in the same period of 2022. The performance of the issuance scale is also similar. The average initial fundraising scale for mixed funds this year is 279 million yuan, while the average initial fundraising scale for the same period in 2023 and 2022 is 469 million yuan and 593 million yuan, respectively.
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When reviewing the materials of mixed funds newly issued in September this year, China Securities Journal reporters noticed that some mixed funds that had previously postponed their fundraising have begun to sell intensively. According to the sales announcement, a mixed fund with a one-year holding period under a fund company in North China received approval from the China Securities Regulatory Commission (CSRC) on March 2, 2021, for the registration of the fund. On March 15, 2024, the Securities Fund Institution Supervision Department of the CSRC issued a reply regarding the extension of the fundraising filing for the fund, approving the fundraising registration, and the fund started sales on September 13th this year.
The Huatai Baoxing Ji Nian Sheng one-year holding period mixed fund, which was also sold on September 13th, belongs to the category of delayed issuance. According to the prospectus and sales announcement, the fund was approved by the CSRC for registration and fundraising on June 13, 2023, and received a reply from the Securities Fund Institution Supervision Department of the CSRC regarding the extension of the fundraising filing for the fund on March 15, 2024. Another mixed fund issued on September 13th - Ping An Industry Trend Mixed Fund, had already received the CSRC's registration approval on January 10, 2023.
Fund companies face issuance pressure.
China Securities Journal reporters interviewed several public institutions and learned that due to the continuous shock and adjustment of the domestic equity market, investors' risk preferences have decreased, and the difficulty of selling "equity-included" funds at the front line has increased. The willingness to issue at the channel end is low, and the issuance schedule for some products has been continuously postponed, with fund companies facing significant issuance pressure.
According to relevant personnel from the Tianxiang Investment Consulting Fund Evaluation Center, some fund companies, in order to avoid product issuance failure, will choose to delay the issuance as much as possible. For fund products that have not raised funds beyond the deadline, fund companies can choose whether to extend the fundraising period on their own. If they choose to extend, they must promptly submit an application for the extension of the fundraising filing.Article 57 of the "Securities Investment Fund Law of the People's Republic of China (Amended in 2015)" stipulates that fund managers must carry out fund raising within six months from the date of receiving the registration approval document. If the fund raising starts after six months and there have been no substantial changes to the original registered matters, it shall be filed with the State Council's securities regulatory authority; if there have been substantial changes, a new registration application shall be submitted to the State Council's securities regulatory authority.
Reporters from China Securities News learned from industry insiders that, in principle, each fund company can have a deferred issuance quota for one product, with no strict restrictions on the specific extension time. However, if the number of deferred issuance products exceeds one, it will affect the approval of subsequent other products of the fund company. "Generally speaking, regulatory authorities adopt a prudent attitude towards the deferred issuance of funds. On the one hand, they strictly control the situation where products have been approved but have not been raised after the deadline. On the other hand, they also make certain flexible adjustments according to the actual situation, aiming to protect investors' interests while maintaining the healthy development of the market," said a person related to the fund evaluation center of Tianxiang Investment Consulting.
Looking at the recent situation of products choosing to issue at the "last minute," industry insiders believe that, on the one hand, it is to meet the requirements for the product's issuance time to avoid frequent deferred issuances; on the other hand, fund companies and distribution channels hope to wait as much as possible until the market warms up and market sentiment improves, so that the difficulty of product establishment will also be reduced.
Optimizing the investor experience is key. In the view of Rong Hao, a wealth financial planner at Paipai Network, unsatisfactory market performance, low investor risk preference, and serious product homogenization are the challenges faced by the new issuance of "equity-containing" funds.
"Previously, market adjustments, product net value declines, investor confidence being hit, and limited new entry funds have resonated to some extent. It is indeed necessary to have a more powerful force to intervene, break the resonance, and then reconstruct the positive cycle of market rise, fund net value rise, investor confidence rise, and increased new entry funds," said a public fund person in South China.
Although the current market is at the bottom, the public fund person believes that the market has cycles, and such cycles also have rules to follow. With the interest rate cut of the Federal Reserve, funds are expected to continue to be injected into the A-share market, many industries are stabilizing at the bottom, and perhaps the market warming is just around the corner.
Contrarian layout is the common vision of the public fund industry, and doing "difficult but correct things" tests the strategic determination of the public fund industry. The public fund person suggests that at the moment, all parties in the industry need to work together, put more effort into investor accompaniment and education, and come up with more ideas in contrarian sales, in order to bring better investment experiences to investors after the market rises in the future, thereby enhancing investor confidence. In addition, the public fund industry also needs to reflect and review the investment management positioning for future long-term development, especially the assessment mechanism, product layout, marketing model, etc., and gradually optimize the investor experience through the mechanism, to regain the "heart of investors".