For "fixed income +" products, every company has different practices. Some are a fund manager responsible for the investment of stocks + bonds, some are the stocks and bonds are split, by two different fund managers, and in the Tianhong Fund, they will be stocks, bonds, bonds three major types of assets for spin-off, by three different fund managers to perform their duties, while assisting each other, so what are the advantages of this?
With this question in mind, we interviewed Zhang Yu of Tianhong Fund, who, as the equity fund manager in the "fixed income +" product, explained the advantages of doing so. Zhang Yu believes that stocks, bonds, and bond-to-bond spin-offs are very natural results in actual operation, stemming from the fact that these three types of assets are assets with completely different risk-return characteristics, and professional people do professional things. For example, our equity strategy is positioned for cyclical growth, the bond part strategy is positioned in the macro cycle and the institutional behavior cycle, and the bond transfer part strategy is positioned at the middle and low price of the bond transfer, so we can see that the core of these three types of assets is their own professional decision. In terms of large-scale asset allocation and macro-top-down, we mainly take the form of mutual verification and judgment to explore and determine the direction and position of the overall allocation.
The cyclical growth of stocks, and the synergy between large classes of assets? Zhang Yu believes that there are three factors affecting the growth of a company: the company's own growth, that is, α, the growth stage of the industry, that is, the β, and the β of cyclical fluctuations. For bottom-up fund managers, they are better at grasping the micro company and the mesoscopic industry level, and do not have a deep understanding of the top-down macro cycle fluctuations, and need to combine macro research to be able to open up bottom-up and top-down. In this way, we can better understand the position of the cycle we are in, give meso and microscopic research a better topographic overview, help to avoid the impact of unfavorable business cycles in the selection of individual stocks, and also help to strengthen confidence in growth in the upward stage of the cycle. Between large types of assets, there are more linkages, such as between the above three strategies, you can see some top-down linkage characteristics, including macroeconomics, investment and financing environment, and some linkage characteristics between styles.
Below, let's first share some investment "golden sentences" from Zhang Yu:
1. From the most simple point of view, the "original intention" of my investment boils down to two words: growth. If there's one more definite phrase, it's "company growth."
2. My understanding of growth is divided into three lines: 1) the company's own growth; 2) the growth of the industry, such as 0 to 1, 1 to 10, 10 to N, the growth curve of different stages of the industry is different; 3) the cyclicality of the industry and the company's growth, especially I have seen many manufacturing enterprises, the process of medium- and long-term growth can not be separated from cyclical disturbances
3. I think there are times when the style of the fund manager defines the style of the product, and sometimes it is the style of the product that defines the style of the fund manager, and these two are two different paths
4. Our approach is to spin off the large-scale asset allocation process, with three different fund managers responsible for the asset areas of expertise: stocks, bonds, and convertible bonds
5. Cycle and growth, one is Beta, the other is Alpha, the art has a specialty, each person focuses on a point, and then through the combination of collaboration, the effect is better than the large and complete way of processing
6. In the A-share market, some varieties that seem to have cheap valuations and relatively small downside risks will perform poorly, and their valuations can be low and low. On the contrary, some varieties that seem to be high-risk are stronger in performance, rising again and again. The core is still easy to produce the expected resonance in the dimension of growth and prosperity, that is, it is easy to long-term short-term problems, which also puts forward more comprehensive requirements for us in making investments: we need to choose the right growth logic and also need to deal with different cycle stages.
7. The fluctuation of value is far less frequent than the fluctuation of price, and choosing a variety with future value and intervening in the lower price stage is the simple truth of investment.
8. There is an impossible triangle in investment: good growth, cycle coordination, and low valuation. If we have to relax on one of them, we may relax the requirements for valuation.
9. When looking at the margin of safety, it is not that the lower the valuation, the better, but the need for the company or industry to have good growth and prosperity, and to achieve good value growth in the future, and this kind of company is the most worthy of investment.
Three lines affecting the company's growth:
The company α, industry β, cycle β
Juan: Can you talk about how you think about investing?
Zhang Yu I am a stock researcher, investment is to hold a good company, watch the company continue to grow, from a small company to a large company in the process of seeing the continuous growth of corporate value. From the most simple point of view, the "original intention" of my investment boils down to two words: growth. If there is one more definite phrase, it is "company growth".
After several years of investment, my understanding of growth is divided into three lines: 1) the company's own growth; 2) the growth of the industry, such as 0 to 1, 1 to 10, 10 to N, the growth curve of different stages of the industry is different; 3) the cyclicality of the industry and the company's growth, especially I have seen many manufacturing enterprises, the growth process can not be separated from the cyclicality.
These three lines of understanding for growth are also slowly understood with the accumulation of time, from the initial growth of the company itself, to the later superposition of the company's growth and industry development stages, and finally the cyclicality of short-term and medium-term fluctuations.
Looking at the problem from the perspective of DuPont analysis, we can also break up these three lines. Using DuPont to analyze and dismantle the company's earnings per share, it can be simply split into the cycle part and the growth part, and then further split into the growth part, and can be divided into the company's growth and industry growth part. At this level, we can form a more comprehensive perspective on growth.
Zhu Ang: You are from a stock investment background, can you talk about your investment system of doing the "fixed income +" part?
Zhang Yu "fixed income +" belongs to the new product design in recent years, the investment system and the traditional stock investment practice is not the same, we did not use the traditional relative return idea to do this product.
The characteristics of the relative return system are: the investment purpose is to obtain medium- and long-term value, and short-term drawdown is not the focus of consideration. Traditional partial stock funds mostly aim at relative returns, and under this goal, there are different types of framework systems, such as bottom-up stock selection, buying tracks, industry rotation, etc. The risk-reward characteristics of this target fall under the high-risk preference type.
For fund holders, they are often plagued by high volatility. In fact, the risk appetite of many people is not so high, and there is a demand for some absolute return funds. If a fund earns 40-50% in a good year and a loss of 20-30% in a bad year, and the fluctuation is large, it is easy to cause the holder to suck up and sell low, and in the medium and long term good products, due to the problem of risk tolerance, they cannot earn the return they deserve.
The "fixed income +" product just makes up for the needs of investors whose risk appetite is not so high. People with high risk appetite can choose equity funds; people with extremely low risk appetite can choose to buy currency funds; and investors with medium risk appetite, such as expected yields between 6-10% annualized and do not want to withstand excessive fluctuations, can choose "fixed income +" products. "Fixed income +" products, corresponding to a relatively large user demand.
Therefore, my investment framework is also done around this investment goal, matching the low-risk characteristics of the product to the corresponding holders. I think there are times when the style of the fund manager defines the style of the product, and sometimes it is the style of the product that defines the style of the fund manager, and these two are opposite paths. This also requires fund managers to fit the characteristics of "fixed income +" products.
For "fixed income +" customers, we want to buy at any point in time, and the corresponding risk-reward characteristics are similar, that is, a sustained and stable return is required.
Cycle + Growth: Top-Down + Bottom-Up
Zhu Ang: So how to make the equity investment in "fixed income +" more stable?
Zhang Yu I think I am more willing to do some equilibrium, hoping to achieve several levels of equilibrium in the equity investment in "fixed income +":
1) Industry equilibrium, not concentrated in a single industry, when necessary, the industry should be able to hedge;
2) Individual stocks are balanced, my portfolio position is relatively dispersed, and I will not buy too much in a single stock position; not because the degree of optimism is not enough, but considering the randomness of stock price fluctuations, a single stock is too heavy will lead to a phased deviation in the net value of the portfolio.
3) The balance of the combination style, fixed income + combination can not only buy one type of company, a type of company is also considered to have a degree of deviation, the combination will have high valuation and low valuation, there is value and growth, so that the portfolio is in a state of multiple styles.
The entire "fixed income +" investment system is also our own continuous exploration, and there will be some new attempts and explorations in the future, and strive to bring a better experience to the holders.
Zhu Ang: "Fixed income +" will also involve the level of large-scale asset allocation, how do you do this?
Zhang Yu Large-scale asset allocation is a high-order dimension in investment. I divide the market into several dimensions, and the lowest dimension is the understanding of individual stocks placed in the industry. For example, in a certain industry, what kind of company should be chosen. Further up, it is a matter of choice in the industry, such as whether to buy liquor or new energy. Then to the next level, there is the problem of large-scale asset allocation, cash, stocks, commodities, bonds and other assets to allocate.
Our approach is to spin off the large-scale asset allocation process, with three different fund managers responsible for the asset areas of expertise: stocks, bonds, and convertible bonds. As for the proportion of these three types of asset allocation in the portfolio, it is the result of the final discussion between the three of us. Our products, positioning cycle growth, also have a certain relationship with this way of operating.
These few people will involve macroeconomics, liquidity, mesoscopic industry, micro individuals, etc., and can give better assistance to investment in the discussion, and there are many mutual confirmation and complementary effects between each other.
Zhu Ang: Your product positioning is cyclical growth, can you talk about the investment system of this piece, how to grasp the cycle, but also grasp the growth?
Zhang Yu Our cycle growth has also made a split internally. I pay more attention to the growth department, the macro research department to grasp the macro level of research, and finally make a combination.
The fundamental judgment of the middle and micro can also give some support to the macro perspective. For example, last year, our macro judgment will rise in the midstream, so which subdivisions of the industry will be better, the order will be stronger, these questions need to be answered by mesoscopic and microscopic research. Moreover, sometimes there is a fight between macro and micro views, which happens to be more in-depth discussion, and when you get a different market view, a lot of content is very helpful to each other.
Investing in the A-share market, only growth thinking may not be enough. Most of the time, we are from the perspective of growth, and there will be cyclical fluctuations that need to be dealt with. Our goal is to avoid the period when there are obvious problems in the industry's prosperity as much as possible, and then configure it.
For example, I started the construction machinery industry, which even the best companies will be subject to the impact of the industry cycle brought about by the macro level. Grasping the two major dimensions of cycle and growth can allow us to find a more suitable buying point and strive to improve the yield of products. And when there is a large fluctuation in the stock, when it should be insisted on and when it should be avoided. We look at many cyclical growth stocks, which have risen a lot since 2016, but few people can start from the beginning, and the process also needs to consider the more multi-cycle aspects.
Zhu Ang: But cyclical thinking and growth thinking are not the same system, how can we grasp it at the same time?
Indeed, cycle and growth belong to two different ways of thinking. I think there's one connection between cycle and growth: meso. Macro is the sum of the middle, and meso is the sum of the micro. We go from bottom to bottom to the middle part, from top to bottom to the middle part, and the two can be linked. Macro-bottom-up corresponds to cyclical operating fluctuations, and micro-bottom-up corresponds to the growth of enterprises. Cycle and growth, one is Beta, the other is Alpha, the art has a specialty, each person focuses on a point, and then through the combination of collaboration, the effect is better than the large and complete way of processing.
In one, for the macro-economy to the meso industry, we think there are many things that can be done, especially the meso level of research, which is actually the most core part, and it is also the junction of grafting into macro research and industry research. For example, this round of cyclical product price increases, at the mesoscopic level to see the construction of supply, supply and demand mismatch, demand intensity, etc., have a very important role in understanding the macro and the market.
Zhu Ang: Your practice of allocating large-scale assets, unlike many people, is discussed by groups, how to avoid disagreements in this process?
Zhang Yu I think from the perspective of personality, I am not a particular optimist, an objectivist, when discussing the allocation of large-scale assets, I will not be optimistic because I am doing equity investment, but more objectively look at the cost performance of the equity assets I manage. In this regard, communication and cooperation are more important in the same framework. The establishment of this framework requires a holistic approach.
Differences actually give us more opportunities to think. Forcing us to come up with more evidence, as well as more in-depth research, to resolve this disagreement, most of the time, we can finally form a conclusion. Sometimes, this divergence will exist, which may be caused by the difference between the perspective of the stock market and the macro perspective of bonds. In this case, we will also make some differences in the reservation of differences, resulting in some differences in the product, such as some differences in growth perspectives.
The level of risk of a stock is not entirely based on valuation
Zhu Ang: You are from stock investment research, can you share a representative investment case?
Zhang Yu I am from a mechanical background, and one of the companies that have invested well in history is a hydraulic parts faucet, which is a typical company with the dual attributes of cycle and growth.
The whole construction machinery round of a large cycle, once reached a climax in 2010, from 2011 into a 5-year downward cycle. By 2016, the entire market view of construction machinery was more pessimistic. At that time, the focus of everyone's attention was still "Internet +", and few people would be interested in the construction machinery industry with "backward production capacity".
This company belongs to the most core parts and components company of construction machinery, the industrial chain is also in a very good position, research and development capabilities, management efficiency are models of high-end manufacturing. But when the industry boom is downward, it is difficult for investors to give a good valuation to the company. Of course, this also gives a better time to invest, and we will later conclude that we can go to places with fewer people, give up some hot spots and temptations in the market, and may be exchanged for buying better assets at a relatively low price. If this asset is ignored by the market because of the prosperity of the asset, then there will be a good investment opportunity.
At that time, it was to see the company's high-quality growth, product category expansion, and extremely high barriers, to achieve technological upgrading and break the import monopoly, and at the same time have the potential to go international. From the perspective of the cycle, in fact, I did not know when the prosperity would rise, but there was not much room to judge the prosperity further down, as long as the two industries of real estate and infrastructure still existed. After that, I didn't expect that the prosperity would return to such a high position.
Looking back, it is true that combining macro, policy and other factors to judge the timing and sustainability of the inflection point of the boom will give a lot of good help to the shareholding. Throughout the buying process, the market is not lacking in growth research, but from a cyclical point of view, it is easy to worry and easy to miss good opportunities.
Zhu Ang: In terms of portfolio construction, how do you do it, and how do you fit the characteristics of risk and return?
Zhang Yu I also mentioned earlier that I am more inclined to make some adjustments to product features. Since we are doing a "fixed income +" product, we need to control the drawdown and the fluctuation of the product, and provide a better combination of risk characteristics for the holder.
So how to control the drawdown? It is generally believed that it is necessary to find some varieties with relatively low valuations, relatively small downside risks, or varieties of robust industries to allocate. In practice, this is not entirely the case. In the A-share market, some varieties that seem to have cheap valuations and relatively small downside risks will perform poorly, and their valuations can be low and low. On the contrary, some varieties that seem to be high-risk are stronger in performance, rising again and again. The core is still easy to produce the expected resonance in the dimension of growth and prosperity, that is, it is easy to long-term short-term problems, which also puts forward more comprehensive requirements for us in making investments: we need to choose the right growth logic and also need to deal with different cycle stages.
The fluctuation of value is far less frequent than the fluctuation of price, and choosing a variety with future value and intervening in the lower price stage is the simple truth of investment.
In fact, the vast majority of the varieties of investment returns that we can really achieve successfully come from objective and rational analysis of value, whether it is a company or an industry, and assets with real value will bring certain returns. But divergences between the price and value of stocks are frequent occurrences, including positive divergences and negative divergences. This also requires us to make certain considerations on the price and make certain concessions to the market in terms of price selection or timing.
A low price and a low valuation give better value protection for an investment. Of course, sometimes, a lower price may not mean that we have bought a better asset, and simply trying to be cheap often does not take advantage of it. Purely because buying a company and industry that is not very good at a low price is a waste of investment. Therefore, in investment, the objective measurement of asset value and price compensation, the risk-return ratio generated, is the most worthy of attention.
Pure valuation is a simple mathematical calculation, meaningless, and it is more important to look for the match between the valuation and the growth logic behind the asset and the value. Many companies that seem to be undervalued may actually not be able to bring a return on investment, and many companies that seem to be overvalued may be the best type of companies in the long term; of course, this statement is also true, most high-valued companies may indeed be overvalued, and many undervalued companies may indeed be undervalued. Therefore, we believe that it is not appropriate to simply select according to the valuation, or according to the industry, but to study and find value from the perspective of the framework we follow, and then consider the price factor, in order to form a better investment.
There is an impossible triangle in investment: good growth, cycle coordination, and relatively low valuation. So we have to relax on one of them, and what I chose is valuation.
Good cycle growth stocks can offset some of the cycle beta downward risks through their own growth alpha. Often at the bottom of the cycle, there are some very good companies, often the stock price experiences a long period of volatility, in the upward stage of the cycle, giving growth premium status. Throughout the process, there may be very little time to give a valuation that investors seem particularly acceptable, because performance is more volatile and valuation swings are larger.
Zhu Ang: This view is particularly interesting, do you think that undervalued varieties do not have a margin of safety?
Zhang Yu In the A-share market, good companies with growth, coupled with upward prosperity, are often less risky. The A-share market will be highly priced for good companies with scarcity; for flawed companies, pricing will sometimes be abnormally low. Many companies fall too much when they fall, and overdo it when they rise. When it falls, there will be many reasons to explain the decline, and when the industry is up, there will be many reasons to explain.
Therefore, when looking at the margin of safety, it is not that the lower the valuation, the better, but the need for the company or industry to have good growth and prosperity, and to achieve good value growth with a high probability in the future, and this type of company is the most worthy of investment.
In terms of constructing the portfolio, my ranking is first of all growth, the second cyclicality is not to reverse, and finally to consider the price and reduce the weight of the valuation. Historically, good companies have never fallen because valuations are too expensive, but because the economy has changed. Even many cyclical stocks have become the valuation of growth stocks in the end because of their good economic performance. This is something that needs to be looked at when considering an overestimated perspective.
A good platform brings positive feedback
Zhu Ang: How do you see the value of the company's platform helping you invest?
Zhang Yu As a whole, our company pays more attention to in-depth research and finds companies with monopolistic characteristics. The starting point of our investment is the medium- and long-term growth value of an enterprise. We will find that even if the industry is cyclical, the stock prices of the good companies in it do not fluctuate much, but those companies that are not so good in texture fluctuate greatly.
I think people will be more or less affected by each other. In particular, if you are a newcomer, entering a platform that values value at the beginning can also form a good positive cycle.
Zhu Ang: The pressure of investment is very large, how do you resist the pressure?
Zhang Yu Frankly said, I think this year's pressure is still relatively large. There were many stocks that could be bought in a very comfortable position last year, but this year there are not so many good opportunities, the pace of market rotation is relatively fast, and sometimes it feels anxious. Many companies don't have time to study it, and the stock price immediately has performance, feeling like walking in a crowd of people who are constantly pushing and shoving you.
Juan: If you weren't a fund manager, what would you do?
Zhang Yu I used to want to go abroad to study and study well. The investment pressure is quite large, I want a relaxed state, what to do, and I don't think so much.
On September 13th, Tianhong Yongli Youjia (A: 013569/C: 013570), jointly created by Zhang Yu and Jiang Xiaoli, a fixed income star who won four Golden Bull Awards, will be officially launched, and interested friends can learn about subscription at Bank of Beijing and major online platforms and offline channels.
Risk Warning: Opinions are for reference only and do not represent investment advice. The market is risky and investments need to be cautious.
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