Index products are a choice of “simple is beautiful”, and long-term allocation of A shares is a prerequisite for investing in such products. Dr. Liang Hongjun of CCB Fund expressed his understanding of such products in a minimalist language. The index market investment in the A-share market is still in the early stage of development. However, with the acceleration of the institutionalization process, the introduction of pensions and the opening of the market, the index fund represented by ETF is an efficient underlying asset, and its configuration value is more prominent. .
There are causes and consequences behind the index investment boom
A share has investment value is the premise
According to the experience of the United States, since the financial crisis in 2008, the scale of index fund management has grown for nine consecutive years, reaching 3.4 trillion US dollars by the end of 2017, a four-fold increase from the end of 2008, accounting for 6.4% of mutual funds. % rose to 18% in 2017. China's stock market has been developing for more than 30 years. In the downturn market environment last year, index funds have risen against the trend and ETFs have reached new highs, mainly due to factors such as changes in investor structure and market effectiveness. “It is not accidental, but inevitable, that ETFs are welcomed by investors.” Liang Hongjun believes that it can be observed from the following aspects:
First, indexed products are characterized by transparency, low cost, risk dispersion, convenient transactions, and easy copying, which is convenient for investors to make timing or long-term asset allocation;
Second, information is accelerating in circulation speed or speed of analysis, and market effectiveness is improving. At the same time, the globalization of financial markets has caused uncertainty in financial markets, especially to overcome market difficulties, and to increase the indexation of funds. Product demand;
Third, investors need continuous means and measures to select funds that have the ability to consistently outperform the market index. According to the practice data of advanced economies, the average performance of active managers in the US, Europe or emerging economies has lagged behind the corresponding index performance over the past 20 years. Take the US S&P 500 index fund as an example. After more than 30 years of establishment, the cumulative income has exceeded 20 times, and the scale has increased from several million to the highest of more than 100 billion US dollars. This is the case of Buffett’s ten-year gambling convention in the global investment community.
Fourth, support at the institutional level is crucial. There are certain restrictions on the institutional share of funds in the new asset management regulations, except for ETFs. In the future, with the long-term funds represented by insurance and pensions entering the market, indexed investment products with transparent operation mechanism and long-term excess investment return potential will become preferred;
Fifth, the pursuit of standardization trends in the financial industry has become a driving force. Standardization can help asset managers improve service efficiency, save management costs and transaction costs. The typical characteristics of indexed products just meet the demand and can be replicated on a large scale.
Liang Hongjun believes that index products are a simple and beautiful choice for investors. It is a big premise to recognize that Chinese stock market has investment value. At present, the efficiency of the A-share market is increasing faster than expected. The current low-level buy-in and long-term holding of index funds is an ideal long-term investment target for investors.
Pure market power activates ETF vitality
MSCI theme fund or a year-round highlight
Liang Hongjun has been in business for more than 16 years. He has been a CCB for 14 years. His resume is also like his investment performance, and has a remarkable continuity. The overall investment climate of the beneficiary index products has changed, and the size and activity of the funds that he manages are increasing. Analysis of incremental funding sources is mainly generated by investor configuration requirements and configuration conversion needs. This is driven by pure market forces and has a strong willingness to trade.
Driven by demand, the CITIC China A-Share International ETF, managed by Liang Hongjun, was listed on the Shanghai Stock Exchange on May 21, 2018. It is mainly based on the constituents of the MSCI China A-Share International Express Index and the constituent stocks. As an ETF product, the liquidity of the fund is also outstanding in similar funds. Financial sector fund data show that as of February 28, the fund's net growth rate has reached 20.37% since the beginning of the year. According to WIND data, as of February 28, the fund had a turnover of 4.298 billion yuan since its opening, and it ranks among the top funds in the same type of funds.
The recognition and acceptance of international capital will have a profound impact on the investor structure, trading style and product ecological optimization of the A market. Liang Hongjun analyzed that the current A-share market value is the second largest in the world, and the proportion of the future increase is expected. On March 1st, MSCI announced that the proportion of A-shares will be adjusted from 5% to 20%, or hundreds of billions of incremental funds will enter China, which is directly beneficial to MSCI funds. Due to the step-by-step implementation, the daily A-share volume will be small, which is mainly due to the psychological impact.
The Index Enhancement Fund is another major feature of the development of index funds. Take the CCB CSI 500 Index as an example. This fund uses the enhanced strategy to obtain excess returns (α), while the enhanced excess returns are mainly from new and active. The alpha gain of the stock picking and the stock index futures arbitrage. According to Galaxy Securities data, as of February 15, CCB CSI 500 has increased its net growth rate by 73.77% and annualized return of 11.55%.
Risk can be expected to strive for excess returns
Stock suspension reduces investment
Liang Hongjun said that in the investment strategy of the Index Enhancement Fund, the excess return α as part of the source of income is another means of conducting risk control. Although it is difficult to filter the fluctuations caused by market risk β in passive management, it is difficult to select a low-risk robust α to hedge a part of β risk and raise the risk control level to a new height.
Looking back at the operation of the CCB CSI 500 Index Enhancement Fund, the most representative year is 2016. The tracking error is less than 3%, the excess return is about 18%, and the absolute return is 1.16%. The information ratio (that is, the excess return divided by the tracking error, which indicates the excess return of the fund per unit tracking error) is about 6 times. At the same time, the excess returns of the fund in each quarter are very evenly distributed, about 4 percentage points. In the context of the “fuse” of the stock market in the past, it is not easy to obtain the performance of this product.
Analysis of the reasons, Liang Hongjun believes that this is mainly due to the team's self-developed Jianxin multi-factor quantitative stock selection model. The model mainly consists of two parts: one is the Alpha model, which is used to pursue excess returns and is responsible for offense; the other is the risk model, which mainly controls investment risks and is responsible for defense. The model has been in operation for many years and has been repeatedly polished according to market changes, and now it has adapted to the Chinese market.
“There are many ways to pursue excess returns, but we emphasize the continuity of risk control and excess returns.” He cites, for example, “some teams have long favored relatively active small-cap stocks, and most of the time they enjoy higher valuations.” Liang Hongjun seems that the style of small-cap stocks is also a risk factor to a large extent. It can contribute excess returns to the portfolio, but the volatility will be relatively large, which will have a negative impact on the manager's mentality.
Finally, when I talked about the impressive things in the investment, he said frankly: "In the past two years, I feel that reducing the stock suspension is the most practical thing. I hope that the problems in the actual investment in the future can be solved as efficiently." .
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