1. Why the balanced style is suitable as a bottom position and suitable for novices
It is difficult to judge the market style, let alone our retail investors, even institutional investors can’t do well.
For example, in the past year, the market style has been changing back and forth, and various industries have performed in turns. Suddenly the market began to surge in the third quarter of 2020; the fourth quarter of 2020 showed a good procyclical performance; early 2021 was a sharp rise in core assets; core assets fell sharply after the Spring Festival, Hong Kong stocks and value styles performed well; the second quarter came again The growth style began to show, and the technology sector, which had been performing poorly before, led the rise.
When the investment style of the fund manager you buy is not in the market, it will affect the holding experience, and it is easy to be unable to hold it. If you change funds and chase the market style, it will be very tiring and easy to be beaten back and forth.
At this time, if there is a fund, there are good companies in various industries and sectors, but it will not become an index fund that includes multiple industries, but can steadily and continuously beat the index, will it be held? very happy?
Continuing to take Zhou Weiwen as an example, the following picture shows Zhou Weiwen’s excess return relative to the CSI 300. The picture is made by Zero City itself. It is not very detailed, as everyone can see and understand. It is mainly composed of the performance of the previous job at Rich Country Tianhe (2006-11-15 to 2011-01-12) and the later job in China and Europe New Trends (2011-8-16 to 2021-7-5).
(Data source: choice Drawing: Zero City Inverse Shadow)
In his 14-year career, it can be seen that Zhou Weiwen’s excess income is very stable, continuously beating the Shanghai and Shenzhen 300 (except during the bull market in 2007, 2009, and 2015, Zhou Weiwen underperformed the index).
This is the benefit of selected industries and balanced style funds. Zero City understands it as a CSI 300 enhancement (in fact, the income is much better than that of the CSI 300)
You don’t need to worry about market style switching or industry switching. You don’t even need to care about market changes. You can buy in almost any time in the past and put it for a longer period of time, and you can get stable excess returns. Therefore, the balanced style is very suitable as a combination. The bottom position is also suitable for fixed investment.
Of course, it is also very suitable for novice Xiaobai, because novices don’t know what the market style and the style of fund managers are. We all come here like this, so buying a balanced style is very worry-free.
2. The balanced style may seem simple, but it is actually difficult to achieve
Some fund managers also claim that they are balanced, with 7-8 industries, but sometimes they are of the same style. For example, multiple industries equipped with chips, new energy vehicles, medical care, advanced manufacturing, innovative drugs, photovoltaics, cloud computing, etc., actually eventually show a growth style and will be affected by the beta of the growth style.
In addition, most fund managers have obvious style labels or industry preferences, either growth style or value style; some are small and medium-sized, and some prefer a certain industry. This is related to their investment philosophy and competence circle.
You expect the fund manager to follow the market to switch investment styles, but he can’t do it either. On the one hand, his ability circle is so large that he does not understand every stock in every industry; on the other hand, the market style is also difficult to judge.
A true equilibrium style must not only achieve industry equilibrium, but also style equilibrium. It is best to have market value equilibrium and market equilibrium (both A-shares and Hong Kong stocks). In this way, no matter what the market style is, there will be good excess returns.
Therefore, the equilibrium style may seem simple, but it is actually difficult to achieve. This requires fund managers to have a large capacity circle, rich experience, and a strong mentality.
Only if you have invested in various industries and experienced various styles, can you be able to generate excess returns in different industries under different market conditions. It is difficult for fund managers to achieve a balanced style without having experienced a round of bulls and bears and studied many industries.
Therefore, there are not many fund managers who maintain a balanced style in public funds in the medium and long term.
According to my research, there are mainly: Zhou Weiwen, Dong Chengfei, Xie Zhiyu, Wang Chong, Zhao Xiaodong, Yang Ming, Yu Guang, Fan Yan and so on. Judging from the results, these fund managers are generally veterans with more than 8 years of service.
3. How did Zhou Weiwen achieve stable excess returns?
1. Rich experience
Regardless of working time and tenure, Zhou Weiwen is one of the oldest fund managers, and his tenure is ranked 7th in the market.
Zhou Weiwen joined the bank in 1998 and successively worked for Everbright Securities and Wells Fargo Fund. He started to manage funds in 2006 and joined China Europe Fund in 2011. He is currently the chairman and investment director of the China Europe Equity Investment Committee.
Since taking office, he has won 2 Golden Bull Awards, 1 Morning Star Award, and 6 Star Fund Awards.
Zhou Weiwen’s masterpiece is the new trend of China Europe, and it is also one of the trump cards of China Europe Fund. Management began on August 16, 2011, and as of July 5, 2021, a return of 325.78% was achieved. The performance comparison benchmark for the same period was -10.74%. In the same period, the CSI 300 revenue was 74.3% (data source: wind information)
2. Balanced and scattered holdings
Zhou Weiwen is good at selecting industries and selecting individual stocks. Taking 2021Q1 positions as an example, the top ten holding industries are very balanced, including 8 industries.
The style is also very balanced, including value-oriented banks, pro-cyclical aviation, chemical fiber, precious metals, growth-style new energy vehicles, and high-quality core assets (Moutai, Wuliangye, Yili)
The average PE of the top ten positions is 32.5, and the ROE is 16.21%, showing the characteristics of reasonable valuation and good quality (data as of July 2, 2021).
3. Appropriate dynamic adjustment
Zhou Weiwen never puts any label on individual stocks, and uses the DCF model of stock selection uniformly. He will look forward to the industry based on the changes in the macro economy, plan ahead for the industries that will perform well in the next 3-5 years, and will appropriately make certain adjustments in accordance with the changes in market styles.
His turnover rate is lower than the industry average, and the retention rate of the top ten heavy-duty stocks averages 58.6%, showing an upward trend.
Some position adjustments will be made (see the figure below), but they are very cautious, and the magnitude is not large, and the minimum is not lower than 70%. Judging from several position changes in history, it has contributed a certain amount of excess income, reflecting Zhou Weiwen’s strong allocation ability.
4. Better risk control ability
The picture below shows Zhou Weiwen’s main indicators in the range from 2011-8-16 to 2021-7-5 compared to CSI 300. The volatility rate of the new trend in Central Europe is almost the same as that of CSI 300. The maximum drawdown is lower than that of CSI 300, but the yield is large. Promote.
It shows that Zhou Weiwen used a lower level of volatility to greatly increase the income, and finally showed a higher Sharpe ratio.
In fact, it is not only the Christians who widely agree with Zhou Weiwen, but also the smarter organizations that choose the foundation to love him very much.
Since Zhou Weiwen took office, CEIBS New Trends has always had a relatively high proportion of institutional holdings (blue in the figure below), which has remained above 70% in recent years. With the expansion of Zhou Weiwen’s management scale, the proportion of institutions has even continued to increase.
(Data source: tortoise quantification)
Another representative is China Europe New Blue Chip, which also has long-term institutional funds. According to data from the 2020 annual report, institutions account for 30%.
In addition, according to the 2020 annual report, Zhou Weiwen owns every fund he owns, which reflects the sense of responsibility standing with the interests of the holders. This kind of situation where every fund holds is relatively rare among fund managers.