Unfavorable start of foreign private placement water trial Bridge water "all-weather" encounters new test
Zhou Ailin
[In addition to a small number of quantitative hedging and CTA strategies, the fundamental stock selection strategy of pure long is still the mainstream for these foreign funds, and it is difficult to obtain positive returns in the unilateral downward market.]
Since last year, a number of foreign capital management giants have entered the Chinese market, successively established a wholly-owned private equity investment fund management subsidiary (PFMWOFE), and successively issued private equity products. This is the first time that foreign capital can raise funds in the mainland market and invest in China's stock, debt, commodity and other markets. In 2018, the number of WOFE registered and issued products in the China Fund Industry Association continued to increase, and many foreign private placements such as BlackRock, Huili, UBS, Fidelity, Schroder, etc. have issued 2-4 stocks or bond products respectively.
What is the performance of foreign private placement that has been tested in 2018? The First Finance reporter learned that due to the sharp decline of A-share, the net value of foreign-funded A-share WOFE products has also been withdrawn to varying degrees, and there is a certain challenge to absorb new funds; The foreign debt base experienced turbulence, some of which were still positive, but customers still preferred stock base; In terms of alternative strategies, both products of the CTA strategy are positive returns, while the "all-weather" strategy product issued by the world's largest hedge fund, Jinqiao Water, in October has not yet disclosed its net value to customers.
Wang Xinjie, director of investment strategy of wealth management department of Standard Chartered (China), told China Business News: "In addition to a small number of quantitative hedging and CTA strategies, the pure long fundamentals stock selection strategy is still the mainstream, and it is difficult to obtain positive returns in the unilateral downward market." However, he also believes that the pace of foreign capital's allocation of A-shares will not stop. "Foreign investors generally believe that China's capital market is affected by the risk of deleveraging and equity pledge in the short term, but it has the value of long-term investment, and the current valuation level is close to the lower position in history. And with the accelerated pace of MSCI and FTSE Russell's inclusion in A-shares, A-share will become a market that cannot be ignored by global fund managers. "
Short term pressure bearing of strand foundation, focusing on long-term configuration
In terms of stock base, each foreign company has its own style. For example, BlackRock focuses on quantitative stock selection and machine learning as a highlight; Huili, Fidelity and Aberdeen prefer to select stocks from the top to the bottom.
The reporter learned that the sales of foreign shares issued after June were fairly good, but in the context of repeated market fluctuations since then, customer sentiment began to become more cautious. "Everyone wanted to see a certain rebound before entering the market, and they were conservative in mind. The fund raising after the opening period was not as good as in the previous period." A foreign WOFE salesperson told the reporter.
"Unilaterally long can only say that less falls is the king." The above foreign WOFE salesperson said that the logic of foreign capital stock selection is basically to select stocks with solid fundamentals, long-term bullish prospects and reasonable valuation, and the frequency of position adjustment is relatively low.
According to media reports, the net value of BlackRock China A Share Opportunity Private Equity Fund Phase I, issued at the end of July this year, had retreated 9.8% as of October, slightly worse than the Shanghai Stock Exchange Index (- 9.42%) over the same period, and CSI 300 Index (- 9.71%) was flat, but significantly stronger than the trend of CSI 500 (- 18.34%) in the same period. The reporter of China Business News has learned that BlackRock's WOFE products were popular at the initial stage. However, July was the starting point of another wave of market decline, so the withdrawal was inevitable.
In September, Zhu Yue, head of BlackRock China's equity investment, said in an exclusive interview with China Business News that this year's A-share turmoil was mainly caused by external factors. Most of the time, funds from the north were still in a net inflow state. A few years ago, foreign capital that had always been ultra low allocation of A-shares had the incentive to continue to allocate A-shares structurally. This trend will not be reversed because of short-term turbulence.
After October, China successively introduced supportive policies, and some foreign investors began to fine tune their investment strategies. Shi Bin, manager of UBS Asset Management China Equity Fund, told reporters that at present the turning point of the policy has been ahead of the turning point of the fundamentals. The bottom of the fundamentals is expected to be next year, and the process will be repeated. But "at present, most of the risks have been released, and the cash level of our China investment strategy has also dropped from the original nearly 20% to 14%, and the strategy will change from defensive to positive".
Coincidentally, Yu Xiaobo, a director of Huili Investment, said that at present, A-share has a high price performance ratio, and has increased a lot of A-share positions, especially in many leading companies in the subdivided fields
New products of debt base layout
For bond funds, fund managers generally believe that market risk sentiment will gradually improve, and "interest rate bull" may be accompanied by a certain "credit bull".
Fidelity was the first foreign capital to issue bond base in 2017, and issued the second bond base in January this year. The fund source of the bond foundation is mainly self operated funds, which aims to run out of the yield curve first and lay out the long-term layout of the Chinese market.
At present, several foreign WOFEs have begun to prepare or have issued bond products. Although private corporate bonds still face certain challenges, foreign fund managers believe that the future prospects will improve, especially the leading private enterprises will get rid of the "dark moment". "Generally speaking, we are optimistic about the leading non real estate private enterprises. The time when this kind of credit bond is in the worst mood has passed, and now there is a relatively certain opportunity." Lou Chao, manager of UBS Asset Management China Bond Fund, told reporters. In September, UBS issued the first private equity fund to distribute China's credit bonds.
Shan Kun, the bond fund manager of Schroder Investment in Asia, also said recently that the structure of bond investors is not decentralized enough, and the market risk preference is converging. "Many high-quality private enterprises have been killed by mistake, thus forming valuable investment opportunities." Select some high-quality private enterprise high-yield bonds, "sooner rather than later" for the layout of next year.
Alternative strategies still need to be tested by the market
In addition to the "foreign private placement" of pure equity and pure debt investment, the main alternative strategies are Bridgewater and Eastman.
In October this year, Bridgewater officially launched its first private equity fund in the mainland of China, "Bridgewater All weather China Private Investment Fund No. 1", following its famous and best at "all-weather" strategy. The reporter of China Business News has learned from a domestic securities dealer that the fund has started to make an appointment in mid October and may be issued in the form of FOF (fund in fund).
The biggest innovation of the "all-weather" strategy is to leverage the bonds so that the contribution of stocks and bonds to portfolio risk is close. Through the strategy of allocating more bonds and less stocks, Bridgewater's return performance is very stable, with low volatility, and the withdrawal is far lower than other strategies. However, as the Federal Reserve starts the cycle of interest rate increase and statement contraction, the bull market of bonds may come to an end, and the US stocks will also flash crash frequently. This strategy may face considerable challenges.
Can "all-weather" work in the Chinese market in the future? Zhou Zhitong, a senior global macro trader and general manager of Entropy Capital, told reporters that the all-weather strategy has several requirements - there are various types of assets (fixed income, foreign exchange, bulk commodities); There are various hedging instruments among major markets to adjust the volatility of major assets.
"In China, there is no problem with fixed income and foreign exchange, but there is a lack of hedging tools. For example, when the credit spread expands, how to solve the credit risk? There are also certain restrictions on foreign exchange transactions. This will lead to changes in the relevance of various types of assets, which also means that Bridgewater needs to make major modifications to the original model. We are also curious about how Bridgewater will achieve 'all-weather' in China. " Zhou Zhitong said.
The CTA strategy is the most flattering in the current market situation. The reporter from China Business News has learned that Eastman has issued two WOFE products, which are still positive at present. The charm of CTA funds lies in that both bull and bear in the market have the opportunity to obtain positive returns, and can also short metals, crude oil and other commodities in the economic cycle based on the judgment of economic slowdown.
Editor in charge: Zhang Yiyi
