Li Jiachun of Changxin Fund: "Heavy Sword without Blade" major asset allocation expert

Qu Yanli | wen

Changxin Fund Li Jiachun is a 23-year fixed income veteran, first in the Bank of Communications, then in Fuguo, DongfangHong, has been involved in various types of assets, and finally to the Changxin Fund, in charge of the entire fixed income line.

Li Jiachun looks at "fixed income +", which is a very typical product thinking, does not emphasize style, emphasizes results, is oriented to customer needs, different products are matched with different investment ideas, and different risk-return characteristics are presented.

Li Jiachun spent a considerable amount of time to introduce the team construction and investment research structure. This is because fixed income + is relatively complex, including large-scale asset allocation, various bonds, bonds, stock allocation and other multi-dimensional perspectives. For Fixed Income Plus, the most important thing is not the individual heroism of going it alone like an equity fund manager, but the core of teamwork.

At different stages of the market, regardless of the ranking, Li Jiachun finally achieved absolute returns. Take, for example, the two "three years" of the secondary debt base: 2011-2014 and 2015-2018, the index performance was mediocre. However, the BOCOM double-interest bonds he managed, A/B, returned 23.96% from September 26, 2011 to August 21, 2014. From October 18, 2016 to August 22, 2018, DongfangHong Steady Select A achieved a return of 11.02%, all of which recorded positive returns. (Daily Fund Network)

At Changxin Fund, Li Jiachun's representative work, Changxin Steady Select A, is an enterprising "Fixed Income Plus", which has been under management since 16 July 2020, with a return of 17.59% since its tenure. Changxin Steady And Balanced A is a conservative "fixed income +", which has been managed since March 30, 2021, with a return of 3% on the job. (Tiantian Fund Network, 2022.2.9)

"Achieving absolute returns is a relatively important thing." Li Jiachun said repeatedly.

Li Jiachun's self-evaluation is "three some, two in place", that is, the time to do investment is slightly longer, the cycle of seeing is more, the experience is richer, and the control of risk is relatively in place. The evaluation of his peers in the circle is "open and closed, the courage to make judgments, the courage to make decisions".

There are three parts about Li Jiachun's introduction.

The first part, personal growth experiences. The second part is team building, investment research structure and investment philosophy. The third part, product thinking and performance.

I. Experience

From 2006 to 2014, Li Jiachun worked in the Bocom Schroder Fund for 8 years, slowly evolving and evolving from a pure bond fund manager, and in 2008, he dabbled in the primary bond base, and in 2011 began to do the secondary bond base.

At that time, BOCOM, with its brilliant stars, was the first "golden age" in the history of BOCOM. In that era, BOCOM advocated a top-down system, somewhat legendary, and macro factors were also the main variables affecting the market.

In 2014, Li Jiachun briefly stayed in the Wells Fargo Fund, doing bond transfer and bank asset management outsourcing special account, which coincided with the bull market. In 2016, Li Jiachun turned to Dongfanghong Assets and began to manage mixed partial debt products, and the scope of investment slowly became more complex, and gradually incorporated strategies such as new and convertible bonds. During this period, Li Jiachun accepted the concept of value investment, adhering to absolute returns and long-term holding.

In 2018, Li Jiachun joined the Changxin Fund and went further, overseeing the entire fixed income line.

Along the way, he continued to enrich his investment philosophy and thinking framework, and when he arrived at Changxin Fund, he began to turn what he absorbed in the past into an executive level.

It is reported that the total management scale of the entire fixed income line of Changxin Fund currently exceeds 90 billion yuan.

Looking at a fixed income + fund manager who is good at large-scale asset allocation, the professional resume is an important aspect, first of all, to have a certain degree of familiarity with various types of assets, which can only be the result of the accumulation of time and span.

Li Jiachun is a fund manager who is difficult to define because he is too senior. His system contains so many things that he has formed a strong tooling mindset, like a toolbox, dispatching different formations and matching different products.

This means that, apart from the concept of absolute returns, he has no fixed path dependence.

II. Team building and investment research architecture

At the Changxin Fund, Li Jiachun did an important job: the construction of the whole team.

Changxin Fund has a total of 26 fixed income lines, 12 investment managers, 8 researchers and 6 traders.

Compared with the general medium-sized fund company, Li Jiachun has made great changes to the research team, and put a lot of human resources on bottom-up research, including credit, debt transfer, macro, interest rate, industry and a total of 8 researchers. Li Jiachun himself is a top-down approach and is good at large-scale asset allocation. This is the typical team cooperation idea.

Under the "fixed income +" line managed by Li Jiachun, the entire investment decision-making process is divided into three levels:

The first level is to do a good job of asset allocation.

Asset allocation involves internal investment research management structure, management methods, and management frameworks. Changxin Fund is divided into three investment research teams, including active equity, quantitative investment, fixed income line, and at the company level, there is an asset allocation committee.

In order to break the limitations, at the asset allocation committee, three investment research teams are convened and meet once a quarter to form a quarterly asset allocation recommendation. "Asset allocation is not my personal business, nor is it a matter within the fixed income team, but a matter for the whole company." Li Jiachun described it this way.

The second level, industry selection, the style of generic assets.

For example, stocks, which industries are currently rising, which industries are declining, what dimensions are currently preferred by the market style, and so on. It is an extension of asset allocation.

The third level is the allocation of individual stocks and individual bonds.

From top to bottom to asset allocation, to the choice of industry and style, and finally to every stock, every debt transfer, and every credit bond are studied clearly and thoroughly, only then can there be a grasp to know which targets to allocate specifically.

Li Jiachun's investment framework is a combination of the above three levels. The amount of configuration is determined by the first two levels. What to configure is determined by the third level.

Li Jiachun is best at large-scale asset allocation. He has always stressed that asset allocation may not necessarily find the optimal solution, but you must exclude the worst cases, such as the largest source of drawdown in 2018 is stocks, and the largest source of drawdown in 2017 is long-end interest rates. First of all, it is relatively easy to find out the risk points, as long as the worst one or two risk points are excluded, there is a greater improvement in the net value. And "good" and "relatively good", the order is very precise, relatively less important.

III. Products and Performance

Every year, Li Jiachun's team will do a "comprehensive product positioning" combing, and adjust the positioning in a timely manner if the positioning is not clear, or when it may change.

In fact, they have weekly product meetings, which is a prerequisite for product positioning. The scope of the discussions at the meeting, including but not limited to: What is the customer structure of the product? What are the ideas and ideas of the customer? What are the risk-reward characteristics that customers want to present? Wait a minute.

Product positioning is divided into three links: before, during and after the event.

In advance, through the product committee, the product positioning is clarified. For example, "fixed income +" products are divided into conservative, stable and enterprising.

Set the position range in advance, and the stable "fixed income +" may be a 20-30% equity position, no more than 30% under optimistic assumptions, and no less than 20% under pessimistic assumptions. The aggressive "Fixed Income Plus" is a 30-50% equity position, which does not exceed 50% under optimistic assumptions and no less than 30% under pessimistic assumptions. The difference will ultimately be reflected in the style.

Another example is the holding structure, the same position, the structure is partial to technological growth, or pharmaceutical consumption, or value stocks? These targets are labeled and then analyzed. Through the proportion and structure of large cycle, large consumption (including medicine), large finance, large manufacturing (including science and technology), etc., the characteristics presented are finally seen. Perhaps in the same 30% equity position, one combination can appear aggressive and flexible, while the other combination appears conservative and stable, thus achieving differentiation between different products.

During the event, the team met once a month to examine whether the investment position and target style of each product met the initial preset.

Afterwards, the product department conducts performance attribution, that is, the assessment is not only the rate of return, but also depends on whether the established strategy has been completed, whether it is loyal to the product positioning in the completion process, whether the decision of the voting meeting has been implemented, and whether some fine-tuning of the resolution has been made according to the product positioning. As such, the execution of the investment manager is tracked from start to finish.

The above is the degree of emphasis on product positioning of the fixed income + line of Changxin Fund.

The customer needs of the entire fixed income + wealth management market are diverse, and it is difficult to meet all the needs with a single product.

Li Jiachun thinks about the "team model", through a dialectical way, the risk-return characteristics of specific products are made, forming a series of products that match the risk appetite needs of different customers. "When the product is running, it may be like Germany or Italy, focusing on defensive counterattacks, or like France or Brazil, it may be better at attacking and relatively weak defensively. Same team, but the way of playing and the line-up have changed." Li Jiachun described.

Dialogue with Li Jiachun

Q: Can you talk about your investment framework?

Li Jiachun: My way of thinking is relatively long-term, on the one hand, it tests the adaptability of different market environments, on the other hand, it can achieve better absolute returns by crossing the cycle, which can also fully reflect the level of fund managers.

I once mentioned eight words: "Based on configuration, take the value of the road".

Based on allocation, that is, in the investment process, the first level of thinking is how to do a good job of asset allocation, which also reflects the simple truth of "don't put all your eggs in one basket".

There are two aspects to taking the road value: (1) Select individual stocks to understand from the perspective of value investment. (2) The current valuation is cheaper than the value, that is, buying a good company at a good price.

To do asset allocation, many times is to compare which asset is relatively expensive and which asset is relatively cheap, and we are always looking for "relatively cheap" things.

Q: So, in the allocation of large assets, the cost performance is very important?

Li Jiachun: Yes, do fixed income +, always consider what kind of drawdown, fluctuation to obtain benefits, sometimes the return is very high target, because the fluctuation is large, we will not necessarily allocate.

Q: What is your understanding of "+"?

Li Jiachun: It is the thickening of the income. The sources of income thickening can be various aspects, including changes in the duration of pure debt, the mining of credit alpha, the transfer of bonds and the thickening of equity.

Q: There are a lot of "fixed income +" products that will invest in some relatively high-prosperity targets in the "+" part, but the style of this year and last year is still quite different. In your opinion, if the industry boom has changed, or the style has changed, what other ways to deal with a product?

Li Jiachun: In the investment process of the equity part of our "fixed income +" product, the characteristics are as follows: First, we still have to do the forward-looking research, that is, to find out the change of market style, which is actually an extension of the research process of large-scale asset allocation, that is, the style change from "asset allocation" to "corresponding asset internal". In fact, its research logic has consistency, and we will do some forward-looking research from this perspective and do some prejudgment.

For the "fixed income +" product investment, in fact, it is more important to do a good job of "coping". Relatively speaking, while doing a good job of forward-looking research, we still have to get close to the market, see and analyze what kind of stage the market is currently in, and then, through such observation and understanding, we must do a good job of "coping".

Q: Therefore, the style of managing "fixed income +" products will be relatively more flexible.

Li Jiachun: Right. "Coping" should be more important for us. From the end of 2018 to the present, in the structural market in recent years, our fixed income team's grasp of the entire market style cannot be said to be comprehensive, but we still have some forward-looking research on the big context, and through these studies, the grasp of some opportunities is still in place. In addition, for our products, the style is still relatively balanced.

Q: Analyze the reasons for the adjustment at the beginning of the year, and how to see the market trend behind?

Li Jiachun: If it is normal for some of the growth stocks with high valuations to adjust, the comprehensive adjustment of A-shares in the beginning of the year is still somewhat beyond expectations, and internal and external factors have some impact.

From the perspective of internal factors, the main reason is that the market has differences in the strength and effect of stable growth. External disturbances, mainly due to the rise in US inflation exceeding expectations, the expectation of fed interest rate hikes, and the sharp fluctuations in the European and American financial markets.

But standing in the current position, we are still relatively optimistic about this year's market.

In our view, the overall tone of the domestic macro-economy in 2022 is still relatively clear, at the National Economic Work Conference on December 8, the meeting pointed out that "the mainland's economic development is facing the triple pressure of demand contraction, supply shock, and weak expectations", based on this triple pressure, the meeting was very positive about stable growth, reflecting the government's strong demand for "stability". In addition to proposing six stability and six guarantees, the meeting reiterated that economic construction as the center, put forward to maintain economic operation in a reasonable range, strengthen and improve macroeconomic regulation and control, increase the cross-cycle adjustment of macroeconomic policies, a series of expressions, requiring all parties to strive to achieve a stable start to the economy in 2022, to good development. We believe that with the gradual realization of financial and economic data, after the two sessions, the market's divergence on the macro economy will further decrease.

The biggest disagreement here is how much real estate is a drag on the economy and whether it can be hedged by infrastructure. At present, the relaxation of real estate policy is gradual, and further relaxation seems to have concerns. Compared with real estate development investment, in fact, the scale of new infrastructure can not be underestimated, and the power of traditional infrastructure may be relatively large from the perspective of marginal changes. The maximum amount of special debt that can be issued in advance in 2022 is 2.19 trillion yuan. It is expected that under the supervision of policies, infrastructure investment may increase significantly in the next two months. The policy adjustment of the real estate industry itself is also continuing, starting from the real estate finance symposium in September 2021, the residential loan has recovered, and the financing related to housing has gradually stabilized. The Central Economic Work Conference requires "to meet the reasonable needs of home buyers" basically confirmed the policy inflection point of real estate, at the beginning of this year, with the renewal of bank mortgage loans and development loans, the financial pressure of housing enterprises in the first half of the year may be eased, and leading indicators such as new construction in the middle of the year are expected to gradually stabilize, and then stabilize the entire real estate investment in the second half of the year.

For consumption, two factors are mainly considered, on the one hand, whether the macro-economy can stabilize, whether the income of residents can grow steadily, and whether consumer confidence can be further restored; on the other hand, it is necessary to observe whether the impact of the epidemic on production and life will decline, and finally fully relax various controls under the joint blessing of special drugs and vaccines. We believe that in the future, under the combined action of the above two factors, the consumption growth rate is expected to be further repaired upwards.

In summary, we are full of confidence in the smooth operation of the macro economy in 2022. Under the stable macro background and friendly policy environment, the mainland capital market still has good investment opportunities, and the structural market is expected to continue.

Q: Is drawdown a constraint on investments?

Li Jiachun: The drawdown is a point that the customer cares about, and there are different voices in the understanding of the drawdown.

A lot of times the excessive focus on drawdowns is actually a constraint.

However, for Fixed Income+, drawdown is a rigid requirement. I believe that the drawdown should be dealt with reasonably. When the market is very optimistic, you go to maintain a high position, if you suddenly fall, fall to a certain position, forced to cut the position, the effect is not too ideal.

Q: What is your stock selection style?

Li Jiachun: Conceptually, I believe that long-term holding, without verifying the wrong view, is not easy to change stocks. However, to control the drawdown of fixed income + to grasp the macro characteristics and asset style of the market at each stage, it is necessary to increase some changes of hands and have the courage to make decisions.

Q: For example, can you tell us about your stock selection concept?

Li Jiachun: An in-depth understanding of a company can greatly enhance the belief in shareholding.

For example, I am optimistic about a certain type of growth stocks, this type of company invests heavily in research and development, which is rare in small and medium-sized enterprises, and in the case of the basic stability of the traditional main business, it has a second growth curve. From the initial long-term plan in the air, to the slow landing, to the cash, to the formation of mass production, although it is a very long process, we have been tracking its growth.

Q: Some of the stocks you hold have been tested a lot over the past year, and you don't seem to have doubted yourself?

Li Jiachun: Yes, as long as I have studied it thoroughly enough, there is no need to question myself because of the price fluctuations in the secondary market. Although I have a gentle personality, I also have a certain persistence, insisting on my beliefs and judgments.

Q: How would you rate your personality?

Li Jiachun: I believe in the middle way and do not like to show my sharp edge.

Q: What is your team atmosphere like?

Li Jiachun: I don't like Yiyantang, but I am loyal to product positioning. I will discuss with the fund manager whether the style is in line with the product positioning. As for whether the style is right or wrong, the turnover rate of transactions, the preference for selecting targets, industry judgment and observation, I rarely evaluate it, and more often respect the opinions of the other party.

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