The ecosystem of the fund industry is undergoing continuous enhancements. From precisely matching product risks through distribution channels, to optimizing performance benchmarks by fund companies, and the iterative upgrades of the fund investment advisory model, along with the continuous reduction of fees for fund investors, various measures have been implemented. These initiatives, taken by all relevant parties in the industry after the release of the “Action Plan for Promoting High-Quality Development of Publicly Offered Funds” (hereafter referred to as the “Action Plan”), are conducive to safeguarding investors’ interests, better fulfilling their needs, and propelling the industry towards higher-quality development.
Defining Product Positioning: A Multistep Approach
For fund investors, the ability to purchase products that align with their risk tolerance is crucial for a positive investment experience. For fund products, the first and foremost step is to clearly define their risk levels. Looking at the latest industry trends, leading distribution channels have started to comprehensively adjust the risk levels of the public fund products they distribute, and have clearly defined product positioning from multiple dimensions.
Recently, the Agricultural Bank of China (5.530, 0.02, 0.36%) issued an announcement regarding the risk level evaluation and dynamic assessment rules for its agency-sold public fund products. According to the announcement, the risk ratings of all agency-sold public funds of the Agricultural Bank of China adopt a cooperation model with fund evaluation institutions registered with the China Securities Association. A third – party cooperative evaluation institution will conduct continuous dynamic risk assessments throughout the product’s entire life cycle using a combination of “pre-event + post-event” and “qualitative + quantitative” methods. The final risk rating will be determined based on the “higher of the two” principle of the evaluation results from the third – party cooperative institution and the fund manager.
Prior to this, China CITIC Bank (7.960, 0.28, 3.65%) and China Construction Bank (9.030, 0.02, 0.22%) had also adjusted the risk ratings of some of the public funds distributed on their platforms. “The Action Plan emphasizes the risk matching between investors and public funds. By dynamically assessing the risk level of products, it can prevent investors from assuming inappropriate risks and also assist investors in choosing products that suit their risk preferences. In the future, the dynamic adjustment of the risk ratings of distributed products may become standard practice for distribution channels,” according to Chuangjinhexin Fund.
In addition to clarifying the risk levels of fund products, the benchmarks for fund performance comparisons have also become more explicit. Since May, several fund management companies, including Cinda Aoyao Fund, Huaxia Fund, China Merchants Fund, Tianhong Fund, Penghua Fund, and Puyi Ansheng, have adjusted the performance comparison benchmarks of some of their funds.
After the adjustment of the performance comparison benchmarks for some funds, the investment scope of the funds becomes more transparent. For example, Huaxia Fund announced that, in order to better align with the product positioning and characteristics of the fund, starting from May 30th, the performance comparison benchmark of Huaxia Juheng Preferred Three-Month Holding Period Hybrid (FOF) will be adjusted as follows: “The return rate of the CSI Equity Fund Index × 12.5% + the return rate of the adjusted Standard & Poor’s 500 Index × 12.5% + the return rate of the precious metal futures price index of Shanghai Futures Exchange × 3% + the return rate of the soybean meal futures price index of Dalian Commodity Exchange × 3.5% + the return rate of the Au99.99 spot real transaction contract of Shanghai Gold Exchange × 3.5% + the return rate of the CSI Bond Fund Index of Pure Debt Funds × 65%.”
The previous performance benchmark of this fund was: “45% of the return of the CSI 800 Index (4140.3272, -23.95, -0.58%) + 5% of the return of the CSI Hong Kong Connect Composite Index + 50% of the return of the China Bond Composite Index.” A comparison of the performance benchmarks before and after the modification shows that the new performance benchmark has been further refined.
Upgrades and Iterations in Fund Investment Advisory Services
To enhance investors’ sense of gain, the reduction of fees for fund products has been ongoing. Since May, more than 10 funds, including Yifangda Zhongzhai New Comprehensive Bond Index Fund, Yifangda Investment Grade Credit Bond Fund, and Penghua CSI Hong Kong Connect Technology ETF, have lowered their management fees.
Many industry insiders have pointed out that as product reforms continue to progress, the importance of fund investment advisors has become increasingly significant. “Centering on client account returns has become a consensus in the public fund industry. The industry now pays more attention to enhancing clients’ investment awareness and improving the actual returns of client accounts. A service loop of ‘awareness – trading – relationship’ is formed around these aspects, rather than merely focusing on product net values. With the release of the ‘Action Plan’, the management measures for investment advisor services and the proposal to transition investment advisor pilot programs to regular operations have raised industry expectations for the future development of investment advisors,” said Xiao Wen, Chairman of Yingmi Fund.
In Xiao Wen’s opinion, investment advisors help investors understand risks, accept market volatility, and make long – term investments in a volatile market, thereby improving account returns and enhancing the investment experience and sense of achievement. China’s buyer – side investment advisory business is evolving from a portfolio – based co – investment model to an account – based management model. This model makes investors’ life goals more specific, links them to corresponding asset allocation strategies, and establishes corresponding sub – accounts for dynamic tracking and monitoring, enabling investors’ life goals at different stages to be “quantifiable, executable, trackable, and achievable”. Currently, Yingmi Fund is developing an investment advisory service monitoring and investment system to achieve refined account management.
Chen Tong, Vice President of Yifangda Fund, believes that an investment advisor is not just a product salesperson; instead, they create value for clients through continuous services. Full – authority delegation is the future trend for fund investment advisors. After gaining full trust from clients, the service model will shift from advisory to management. Under the requirements of the new asset management regulations, currently, investment advisor services for institutional clients are mainly implemented in the advisory model, and the cooperation path and business model still need further exploration.
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