CFIC Introduction
Original title: The allocation ratio continues to increase, why bank wealth management favors bond funds
As two important asset management sub-industries in China, the relationship between bank wealth management and public funds includes "buy and hold" in addition to competition.
Deposit interest rates continued to fall, regulators stopped "manual interest supplementation", ...... "deposit moving" effect, personal funds and corporate funds continued to flow into the wealth management market, and the scale of bank wealth management returned to 29 trillion yuan. At the same time, the "asset shortage" has intensified. In this context, a reporter from the China Securities Journal found that public funds, as the underlying assets of bank wealth management, have received more and more attention.
For bank wealth management, the supply of high-quality assets and human resources is relatively insufficient, prompting bank wealth management to more actively allocate liquidity, transparent and standardized, and rich types of public fund products. Dismantling the types of funds, the reporter found that bond funds with low risk, low volatility and high liquidity, especially short- and medium-term bond funds, as well as short-term bond funds with long-term stable historical performance, are the most favored by bank wealth management companies.
Looking forward to the future, a number of bank wealth management companies told reporters that the diversity and flexibility of public funds meet the asset allocation needs of bank wealth management in different market environments. In the future, we will continue to increase the allocation of public funds, and at the same time, we will appropriately allocate long-term high-performance equity funds and convertible bond funds to enhance the profitability of wealth management products.
Increase investment in public funds
"At the beginning of the year, there was a wave of downward interest rates, and the underlying assets of the wealth management industry were not enough. After the supervision stopped the 'manual interest supplement', the road for bank wealth management to nest deposits with the help of insurance asset management has also been blocked, and the pressure on asset allocation is even greater. A person from a bank wealth management company said bluntly to reporters.
Under the effect of "deposit moving", the scale of bank wealth management maintained a high growth trend. According to Wang Yifeng, chief analyst of the financial industry at Everbright Securities, the scale of wealth management in the whole market at the end of May was 29.7 trillion yuan to 29.8 trillion yuan, an increase of 400 billion yuan to 500 billion yuan month-on-month. However, this phenomenon is accompanied by the intensification of the "asset shortage".
Industry insiders said that the deposit interest rate continues to fall, superimposed by the regulatory suspension of "manual interest supplement" and other factors, the interest rate of deposit assets held by bank wealth management is declining, and it is inevitable to reduce the allocation of such assets. More and more bank wealth management companies are setting their sights on public funds with higher yields. A financial manager of a state-owned bank said that in the current low interest rate environment, public funds can be used as a relatively safe investment option with higher returns than deposits to meet the needs of residents to maintain and increase their wealth.
According to the estimation of China Merchants Securities, at the end of the first quarter of this year, the proportion of assets invested in public funds by bank wealth management products increased from 2.1% at the end of 2023 to 2.5%. The asset scale of banks' wealth management allocation public funds will increase from about 600 billion yuan at the end of 2023 to about 700 billion yuan. Among them, about 100 billion yuan was added to bond funds, money market funds, alternative funds and QDII funds were slightly increased, and mixed equity funds were slightly reduced.
"For us, bond funds, especially short- and medium-term bond funds, are the mainstream allocation direction. Because they have the characteristics of low risk, low volatility and high liquidity, they meet the allocation needs of bank wealth management. In addition, there are also large-scale short-term bond funds with long-term stable historical performance. When talking about the type of public fund that is favored, a financial person from a state-owned bank told reporters.
Although the authoritative data at the end of the second quarter has not yet been disclosed, a number of industry insiders said in an interview with reporters that due to the aftermath of "manual interest supplement", the allocation of public funds by bank wealth management will be further increased.
Lou Feipeng, a researcher at the Postal Savings Bank of China, said that since the beginning of this year, deposit interest rates have been lowered, the bond market has fluctuated, and the income of traditional investment channels has decreased, while the scale of bank wealth management has maintained growth, while facing a "shortage of assets". In this case, the increase in the allocation of bond funds by bank wealth management will help stabilize income. The customers of bank wealth management companies have a low risk appetite, and the returns of bond funds are relatively stable, and the two have a high degree of matching.
Emphasis on strong liquidity and transparency
They are also buying and selling bonds, why do bank wealth management companies need to "entrust" to bond funds? In answering this question, alleviating the pressure of liquidity management is the reason for the allocation emphasized to reporters by a number of bank wealth management companies. In fact, due to the traditional model of bank wealth management companies collaborating with the parent bank, most bank wealth management companies are slightly insufficient in terms of human resource allocation. Therefore, many bank wealth management companies choose to "throw the pressure of liquidity management to public funds".
Wu Youran (pseudonym), general manager of the research department of a city commercial bank's wealth management company, told reporters, "It is also very troublesome for us to buy and sell bonds, but the public fund can be redeemed on the same day." The bond market is not like the stock market, where you can place an order directly and then trade, and bond transactions are negotiated and then traded, and it is difficult to find so many counterparties in a short period of time. A wealth management product holds more than 20 bonds, and our manpower may not be able to sell them all in one day, but if we hold a bond fund, we can redeem all of them in one day. ”
A person from a joint-stock bank wealth management company also told reporters, "As for those bonds, wealth management companies can buy and sell them by themselves." However, taking our company's fixed income department as an example, the scale of assets under management is more than 500 billion yuan, there are more than 10 investment managers, and there are only 5 traders. ”
In the face of so many product choices in the market, why public foundations stand out, standardization and transparency are important factors emphasized to reporters by industry insiders. "Public fund products will have rankings, guaranteed performance, and hard rules for subscription and redemption. Therefore, after comparing so many products on the market, I chose a public fund. The above-mentioned joint-stock bank wealth management company told reporters.
Ren Tao, a distinguished researcher at the National Finance and Development Laboratory, said that public funds are relatively transparent and have complete information disclosure, which makes it easier to meet the nesting and penetration requirements of the new asset management regulations. In addition, wealth management funds are easily constrained by regulatory indicators such as concentration in asset allocation, and the efficiency of asset allocation can be improved by allocating public funds. At the same time, public funds usually have stronger investment and research capabilities, and bank wealth management companies can not only make up for their own shortcomings by allocating public funds, but also create business cooperation opportunities between banks, wealth management companies and fund companies.
The demand for high-quality public offering varieties persists
"Investing in public funds can improve the efficiency of asset allocation. I can open a position in one day, and after the subscription is successful, the bonds in it will be counted as mine according to the proportion of shares. In my opinion, investing in public funds is equivalent to a means of trading. Wu Youran told reporters that despite the above-mentioned advantages of public funds, bank wealth management companies are still more cautious when investing, and an important factor is the regulatory position indicators.
According to Wu Youran, according to the relevant regulations, the market value of a single securities or a single public securities investment fund held by each public wealth management product shall not exceed 10% of the net assets of the wealth management product. The market value of a single securities or a single public securities investment fund held by all publicly offered wealth management products of a commercial bank shall not exceed 30% of the market value of the securities or the market value of the public securities investment fund.
"This indicator is the easiest to exceed. Because the size of the fund company is announced on a quarterly basis, if we don't know that a fund suddenly suffers a large redemption, but we still hold it, and finally the proportion exceeds the regulatory index, we will step on the red line. Therefore, our investment managers do not buy large quantities of mutual funds. In addition to money market funds, a wealth management company invests in public funds with a maximum of 20% of its position. Wu Youran said.
Ren Tao also said that, on the whole, the current volume and proportion of wealth management funds allocation public funds are not high, which indicates that wealth management funds have relatively high requirements and thresholds for the selection of public funds, considering that wealth management funds themselves have higher requirements for liquidity and low risk appetite, so the past performance is more stable, with a certain income elasticity, high market recognition and can bring incremental value of public funds are more likely to be favored by bank wealth management.
Looking forward to the future trend of bank wealth management allocation, a number of industry insiders told reporters that bank wealth management companies will continue to increase the allocation of public funds, especially in the context of "asset shortage", public funds have become an important investment direction. With the changes in the market environment and regulatory policies, bank wealth management will further optimize the asset allocation structure to adapt to the needs of investors and changes in the market.
"There is a certain difference in the risk appetite of bank wealth management and public fund investors, and the follow-up bank wealth management will emphasize more on the balance between liquidity, risk and return, and continue to take fixed income or quasi-fixed income products as the main allocation direction. In this process, as one of the allocation directions of wealth management funds, whether public funds will increase their allocation depends on market performance. However, the demand for high-quality public funds that can meet the needs of low-volatility and high-liquidity at the same time should continue to exist. Ren Tao said.
A person from a state-owned bank believes that in the context of "asset shortage", bank wealth management companies will increase the allocation of public funds, and will appropriately allocate long-term high-performance equity funds and convertible bond funds to enhance the competitiveness of wealth management products.
Lou Feipeng said that at present, the prohibition of "manual interest payment" on bank deposits means that the income of wealth management funds allocated to deposits will be reduced, which will promote bank wealth management to allocate more assets in addition to deposits, and may increase the allocation of public funds in the future. In terms of fund types, we will continue to focus on bond funds, and may also increase the allocation of hybrid or equity funds in order to stabilize or increase returns, so as to continuously improve the competitiveness of products.
Source of this article: China Securities Journal
Reporter: Zhang Jialin
WeChat editor: Guan Qiao
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