In the context of industry transformation

1. The rapid development of FOF bank wealth management products

FOF (Fund of Fund) is a kind of investment portfolio strategy fund that appeared in the 1960s and 1970s. FOF uses other funds as the investment target. It is a portfolio of various funds that indirectly invests in stocks, bonds, and bonds by holding other funds. Equity and other assets. FOF bank wealth management products are wealth management products created based on the FOF investment philosophy. Since the new asset management regulations, FOF bank wealth management products have developed rapidly. As of the end of February 2021, Puyi Standard has recorded a total of 159 FOF-type bank wealth management products[1], all of which are net-value products. The issuance time is concentrated in 2019 and 2020, with 35 and 115 issued respectively. In 2021 A total of 7 models were issued in the first two months.

Chart 1: Number of FOF-type bank wealth management products issued in recent years

In the context of industry transformation

Data source: Puyi Standard

In-depth study of the reasons for the development of FOF-type wealth management products by banking institutions at this stage can be summarized as follows:

First, from the perspective of the supply side of the financial market, in the context of structural reforms on the financial supply side, the state has vigorously promoted the development of direct financing and increased the proportion of direct financing. Banking financial management to increase investment in equity assets is an inevitable choice to comply with macroeconomic policies. At the same time, the new asset management regulations and their supporting rules continue to promote the transformation of bank wealth management net worth and non-standard conversions, clarifying that publicly offered wealth management products can invest in stocks through publicly offered funds, and publicly offered wealth management products issued by wealth management subsidiaries can even directly invest in stocks. The institutional barriers to bank financing and investment in stocks.

Second, from the perspective of customer demand for bank wealth management, although overall bank wealth management investors have a low risk appetite, with the generational replacement of investors, the risk appetite of post-80s and 90s investors has increased. With increasing investment demand, the existing banking assets cannot fully meet the needs of the new generation of customers. FOF-type bank wealth management products take into account equity asset investment and relatively low risk (compared to equity public funds). While meeting the needs of customers to enter the equity market, they can also help banking institutions build better solutions in the context of industry transformation. Distinctive product system.

Third, from the perspective of the ability of banking institutions themselves, commercial banks have greater advantages in credit approval and risk control. Therefore, bank wealth management developed with this advantage focuses on investment in bond assets, and less involvement in equity assets. Equity asset investment and research capabilities are relatively weak, and the construction of investment research systems often takes a long time to accumulate and cannot be accomplished overnight. Therefore, for a long period of time, banking institutions will face the problems of imperfect equity asset investment and research systems and insufficient investment and research capabilities. At this stage, public funds are undoubtedly the asset management institution with the strongest equity asset investment and research capabilities, and it is a better choice for banking institutions to use public funds to cut into stock investment through FOF.

2. Analysis of the characteristics of FOF financial products

From the perspective of issuing banks, FOF-type financial products are mainly issued by state-owned banks and joint-stock banks. Among them, the Industrial and Commercial Bank of China (601398, shares) has the largest number of issues, reaching 91 models, accounting for nearly 60% (57.23%) of the total number, followed by China Construction Bank (601939, shares) and Minsheng Bank (600016, shares), respectively issuing 31 models And 16, the number of issued by the remaining banks does not exceed 5. It is worth noting that among all 159 FOF wealth management products, 117 are issued by wealth management subsidiaries, of which ICBC Wealth Management issues 77 models, CCB Wealth Management issues 31 models, CMB Wealth Management, China Post Wealth Management, Everbright Wealth Management and CNCB Wealth management issues 4, 2, 2 and 1 respectively. It can be seen that after the regulatory liberalization of the restrictions on bank wealth management investment stocks, FOF has become a good cut for wealth management subsidiaries to enter the equity market.

Chart 2: Number of FOF financial products issued by banks

In the context of industry transformation

Data source: Puyi Standard

In terms of product types, FOF-type wealth management products are still dominated by fixed income, but the proportion of mixed products is significantly higher than the overall situation of bank wealth management products. Specifically, there are 98 fixed-income products, accounting for 61.64%; there are 60 hybrid products, accounting for 37.74%; there is only one equity product, which is issued by Huaxia Bank (600015, shares). Fixed-income FOF financial products generally use a “fixed-income +” strategy, invest a large proportion of funds in stable-income fixed-income assets to obtain a stable return, and invest a small amount of funds and fund shares to achieve high returns .

Chart 3: Number of different types of FOF wealth management products issued

 

Data source: Puyi Standard

From the perspective of customer types, privately-owned products accounted for a significantly higher proportion of FOF-type wealth management products. There are as many as 50 FOF-type wealth management products for private banks, accounting for 31.45%, which is much higher than the overall situation of bank wealth management products. Part of the reason is that high-net-worth customers generally have a higher level of education and risk appetite, and their acceptance of net-worth products is also higher. Therefore, they are the first to implement FOF-type wealth management products among high-net-worth customers.

Chart 4: Number of FOF wealth management products issued by different customer types

 

Data source: Puyi Standard

From the perspective of operation types, FOF-type financial products include slightly more closed products than open products. Specifically, there are 90 closed products, accounting for 56.60%; there are 68 open products, accounting for 43.40%, 66 of which are semi-open products. The average investment period of all products (open-ended products are calculated based on the interest payment period) is 525 days, which is significantly longer than other financial products, and more reflects the intention of value investment.

Chart 5: Number of FOF financial products issued for different types of operations

 

Data source: Puyi Standard

In summary, under the combined effect of macro policy promotion, changes in customer demand, industry regulatory requirements, and insufficient capabilities of banking institutions, FOF-type wealth management products have become an important innovation direction for banking institutions to get involved in stock investment and active management transformation. As state-owned banks and joint-stock banks are leading in overall strength and are more capable in product innovation, it is expected that they will remain the main issuers of FOF-type wealth management products in a relatively long period of time. In terms of specific product issuance, although the risk appetite of the younger generation of investors has risen, it has not changed the fact that the overall risk appetite of bank wealth management investors is relatively low. FOF-type wealth management products are mainly fixed-income products and focus on private bank customers It is a better choice in the current context.

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