Zhai Chenxi, chairman of Xinhua Fund: Hard work to provide customers with a stable and sustained income curve

China Fund News reporter Sun Xiaohui

This year marks the 18th year of Xinhua Fund's establishment, and the veteran public offering is finally about to usher in its key moment: to join the 100 billion camp.

In the past ten years, Xinhua Fund has witnessed brilliance and encountered challenges. "Xinhua Four Jie" was once famous in the field of rights and interests, and it was also shining in the field of fixed income, but the company's management scale often hovered within 40 billion yuan in previous years. In 2020, with the optimization of the equity structure, corporate governance was further improved, injecting new vitality into the development of Xinhua Fund. Two years have passed, the top-down systematic optimization and upgrading of Xinhua Fund has achieved initial results, as of the end of June 2022, the scale of public offering management has reached a record high of 86.831 billion yuan, compared with only 20 billion yuan at the lowest in early 2020.

Since concurrently serving as the chairman of Xinhua Fund, Zhai Chenxi has led the management and all employees to start the company's upgrading and transformation. Standing at a new starting point, she said that providing customers with a stable and continuous income curve is the lifeblood of an asset management institution. In the next decade, the ability to obtain absolute returns is the main decisive force in the ranking battle of head fund companies.

Provide a stable and sustained revenue curve

It is the lifeblood of asset management institutions

China Fund News: Since taking over as chairman of Xinhua Fund, what new understanding of the public offering industry have you had?

Zhai Chenxi: After the promulgation of the new asset management regulations in 2018, the mainland asset management industry has entered the stage of net worth transformation, and all kinds of asset management institutions have competed on the same stage and accepted the test of the market. This year is the first year of the official implementation of the new asset management regulations, so far, the various segments of asset management continue to show a differentiated development trend, of which the continuous maintenance of good positive growth is still the public fund.

According to agency forecasts, by 2030, the household assets of Chinese residents will double to more than 400 trillion yuan, and the scale of assets under management may also double. Based on this calculation, the annualized growth rate of China's asset management industry is about 10%, and the average annualized growth rate of public funds may not be less than 20%, and public funds are likely to be the largest type of Chinese asset management institutions after 10 years.

China Fund News: From the perspective of high-quality development, what are the places where the fund industry needs to be continuously improved?

Zhai Chenxi: At present, whether it is equity and debt investment, the type of strategy used by public funds, or the long strategy, it will follow the fluctuations of the capital market. Our long-term study of the management strategies of overseas large macro hedge funds has found that in order to provide investors with more stable returns in the long run, it is necessary to use a variety of tools. With the enrichment of derivatives, there will be more and more diversified strategy needs, but the public offering industry is still dominated by bulls, so we began to try long-short strategies in the special account field, as well as multi-strategy types such as stocks, bonds, foreign exchange, and commodities, to explore the real absolute return.

After breaking the just exchange, the people are more cautious in financial management. To make customers recognize, the key is to provide them with a stable and continuous income curve, which is the lifeblood of an asset management institution.

I have been investing for nearly 20 years, and I have a lesson: in the ups and downs of the capital market in the past 20 years, compared with strategy-driven companies, sales-driven companies are more likely to encounter bottlenecks or challenges in market fluctuations. If the company's management system is not mature enough, the management ability does not meet certain standards, the larger the spread, the greater the risk.

The principle of asset management institutions is called social responsibility, which should do the best products and returns within their own capabilities, manage the management you can afford within their own circle of ability, and develop while practicing internal skills. If there is a product that is strong enough, don't worry about not having scale.

China Fund News reporter: How can securities companies do a good job in differentiated development of asset management public offering business and public fund companies?

Zhai Chenxi: The overall population of securities company asset management is the sales department's own customers, mainly special account wealth management, but also mainly absolute return customers, so how to find more diversified strategies in the absolute income strategy is the problem of securities company asset management transformation. At the same time, the original scale of asset management of securities companies mainly rely on non-standard business support, and now after returning to active management, it is necessary to go through a process from relying on channel business to relying entirely on investment and research capabilities, and the current work of securities companies' asset management is to benchmark public offerings and enhance investment and research capabilities.

Public funds should let investors from securities companies asset management and bank asset management adapt to the fluctuations of public offerings, the future with holding period of more and more products, in order to allow investors to better adapt to this fluctuation, improve the holding experience, change the "fund makes money, investors do not make money" problem, so, in investment research, more brokerage asset management to learn from the public offering, and in the holder experience, the public fund also has a lot of homework to do.

China Fund News: In the process of fund company operation and management, are there any times when you feel challenged and confused?

Zhai Chenxi: First of all, I don't think the industry is solidified, but the gap between medium-sized institutions and large institutions is huge, and the pressure of industry leaders and institutions to climb is not the same. The larger the platform, the more dependent on the ability of the organization, and the smaller the platform, the more dependent on the ability of people. I have experienced the entrepreneurial process of securities companies from 80 to 30 to cross the 50th ranking, it is not easy, Xinhua Fund is experiencing the process of climbing from more than 70 to the top 60, if you continue to climb forward, the effort paid is much more difficult than the institutions that are stable in a certain category of rankings.

Kazuo Inamori has a good saying: What is the meaning of life? The meaning of life is that one day when you are not there, it is better than when you were born. As a manager of an enterprise, a company may become positive and upward because your intentions are positive. This may affect hundreds of employees and the families behind them, but also affect all partners and investors, so people engaged in the financial industry must have a sense of awe, really provide good customer service, and at the same time, in this process, the self has also grown, developed, transformed, and sublimated.

Practice hard

The all-round systematic upgrade was completed

China Fund News: What is the biggest highlight and progress of Xinhua Fund in the past two years?

Zhai Chenxi: We are pleased to see that Xinhua Fund has achieved self-breakthrough. This year is the 18th anniversary of the establishment of Xinhua Fund, the company's history is very deep, the performance was once very good, but before 2020 failed to achieve a breakthrough in scale, always hovering within 40 billion yuan, and even fell to more than 20 billion yuan at the trough of early 2020. After 2020, we have set a goal: the scale will reach 100 billion yuan in three years, and enter the top 30% of the industry in five years. We achieved a small step towards the five-year goal in 2020, and the scale of public offering management exceeded 50 billion yuan for the first time at the end of the year, reaching 54.2 billion yuan; At the end of 2021, it reached more than 70 billion yuan, a record high of 86.8 billion yuan at the end of the second quarter of this year, and the comprehensive ranking also rose from more than 70 to the top 60. At the same time, we have always looked at scale and performance as the most important parallel goals, and the ranking of equity and fixed income products has remained at the forefront of the industry over the past two years.

China Fund News: What actions has Xinhua Fund taken to achieve the strategic goal of "big and complete"?

Zhai Chenxi: The long-term development of good asset management institutions does not rely on individuals but on teams, because with the changes in the internal and external environment, investment has become more and more complex, and in order to manage products well, it is necessary to have both macro, meso and micro perspectives, and every link is indispensable. Therefore, from 2020 onwards, we have embarked on the organizational reform of investment research, regrouped in the field of investment research, so that the company's product management capabilities have jumped from individual capabilities to organizational capabilities, and gradually realized the management mode from a single fund manager model to a large group, and realized a significant increase in the per capita management scale of fund managers. Specifically, it is mainly a large group of two major sectors, equity and fixed income, of which equity is grouped according to large value, big growth and big energy, fixed income is grouped by currency, short and medium term, interest rate, credit, convertible bonds, and investment research personnel are classified according to large groups.

We have pulled the investment research system through, which not only makes investment research more integrated, but also helps research to empower investment, and allows more mesozoic fund managers to have the opportunity to grow. After nearly two years of verification, we have cultivated a group of mesozoic fund managers with a certain management scale, which has also laid a good foundation for the next step of promoting excellent internal investment research personnel and gradually supplementing external mature fund managers.

China Fund News: In addition to the organizational reform of investment and research, what systematic improvements has Xinhua Fund made in terms of sales channels?

Zhai Chenxi: In the past two years, we have also done a comprehensive optimization and upgrade in the market field, and the biggest change is to split the original market department into "4+1", that is, four front-line combat teams and a central and medium-office central department, and carry out a professional division of labor according to the type of customers we face. For example, the retail department corresponds to all the banks responsible for consignment sales; The Mutual Gold Department has formed a one-on-one strategic cooperation with the Internet head company, and set up a special Jinke operation team to serve this connection with Internet customers and do a good job in online operation; In view of the different demands of institutional customers, the financial institution department specializing in serving insurance customers has been established, and the institutional department specializing in serving banks and other customers , the financial interbank department, has also been established. Then, in response to the special needs and special risk preferences of these customers to find and build products that suit them, we have made a qualitative leap in the expansion and construction of institutional customer groups in the past two years. This may seem like just an increase in customers, but in fact it is a very large thickening of our customer soil. In addition, the market middle office department is specially retained, providing data and CRM support, and empowering sales collaboration to better meet and respond to customer needs in a timely manner.

Go the road of absolute profitability

Equity investment is essential

China Fund News reporter: Doing absolute returns is a very core adjustment of Xinhua Fund in the past two years, what is the original intention of making this adjustment?

Zhai Chenxi: The track with absolute benefits is the largest. I have been engaged in fixed income investment for a long time, and I have served some large institutions for a long time, and institutional investors are basically pursuing absolute returns. In fact, individual investors invest mostly in China and also pursue the absolute return on household assets. Therefore, absolute returns are the biggest demand in China's wealth management market.

We can translate with absolute revenue as a return for our clients, which is what we should do most. In the future, in the long-term development process of Xinhua Fund, the core goal is to create returns. This doesn't require equity fund managers to have to earn absolute returns, but to generate returns for their clients. We want a higher percentage of products in our product category that are characterized by absolute revenue. In the era of new asset management regulations, the ability to create absolute returns is the decisive factor for China's asset management institutions to achieve great development. In recent years, the ranking battle of the top 20 public funds has not changed much, but in another decade, the changes in the top 20 or even the top 30 must be related to the company's ability to obtain absolute returns.

China Fund News: Is this positioning consistent with the goal of becoming a "big and complete" comprehensive asset management institution? Will equity investment be weakened?

Zhai Chenxi: Fixed income is the basis for the development scale of fund companies, but the company should develop for a long time, important performance performance depends on the display of equity products, equity is also the comparative advantage of public funds over other management institutions, coupled with the fact that Xinhua Fund has a very good equity yield curve in history, so equity is a sector that Xinhua Fund attaches great importance to.

It is foreseeable that in the future, the proportion of financial assets in the asset allocation of household residents will certainly increase significantly. Therefore, if the Chinese people want to obtain better returns, equity assets must be allocated, and equity assets are the "winners and losers" that determine the performance of asset management institutions.

China Fund News reporter: At the end of the second quarter of this year, the management scale of Xinhua Fund was close to 90 billion yuan, compared with the previous quarter, the main scale increase came from the contribution of fixed income varieties such as cargo base, how to see the current product structure characteristics of Xinhua Fund?

Zhai Chenxi: We promote the overall growth of scale, and we must also follow the trend in stages. In the first half of this year, the capital market was violently shaken, Xinhua's equity products withstood the test, and the net value scale and share achieved net growth, but the increase was lower than that of low-risk assets. On the other hand, we have made some active guidance to investors in marketing strategies, especially for Individual Internet investors, in the first quarter, we focused on promoting low-risk assets represented by currencies and short-term and medium-term bonds, and in mid-May, we began to prompt institutional investors, including channel customers, to increase equity assets.

On "Fixed Income+"

Polish the balanced strategy system well

China Fund News: With the advent of the era of personal pension, how does Xinhua Fund lay out in terms of FOF?

Zhai Chenxi: In the FIELD OFF, we did not jump into the white-hot competition camp. Absolute return is the biggest demand in the Chinese market, but how to do absolute income is not a noun to do it. In the first two years, the "fixed income +" fire passed a round, and the result became "fixed income-" this year. In fact, the essence of "fixed income +" and FOF is the same, which is to use the balanced allocation of equity and debt to create a product with good returns and controllable risk drawdowns, in order to achieve the goal of absolute returns, but this is not an easy task. Equities and debt are naturally balanced because they are hedged assets based on economic growth. In general, the economy grows fast, stocks rise and bonds fall; Economic growth slowed, stocks fell, and bonds rose. Therefore, in the market environment dominated by economic fundamentals, "fixed income +" is a balanced strategy, and FOF buying fixed income and equity funds can also form a balanced strategy, but there is an exception - when liquidity is insufficient. If liquidity is generally abundant and economic fundamentals are stable, both types of assets will rise. Once the liquidity exits, the stocks and bonds will fall, the most typical US interest rate hike in the first half of this year is higher than expected, the US stocks and US bonds are falling, and China's A shares and bonds have also fallen together for a while. In the case of double killing of stocks and debts, a simple bullish "fixed income +" can only alleviate fluctuations and cannot be hedged. Investors should have expectations for this, so in the field of "fixed income +" or FOF, the core is to do a good job of investor education, so that investors can understand that whether it is "fixed income +" or FOF, there will be fluctuations, and there are different reasons for fluctuations, which are more complicated than pure debt and pure stocks. Only when investors better understand the characteristics of such products can they achieve better results.

China Fund News: Xinhua Fund has always done a good job in the field of "fixed income +", what progress has been made in the past two years?

Zhai Chenxi: Our main work in the past two years is still to explore the absolute return strategy more thoroughly on the "fixed income +" and understand the layering. What does it mean to make layering clear? For example, there are some customers who need 5% of the profit, but are not willing to bear the drawdown or loss, which is low risk and low volatility; Some customers want 5% to 8% of the profit, can withstand 1% of the drawdown, called medium risk; There are also customers who can withstand 3% fluctuations as long as 8% of the profit. These three categories are "fixed income +", but it is a different strategy, don't look at the fixed income a "+" word, in fact, a product into a multi-wheel drive: a wheel is in bonds, a wheel is a stock, and then from the macro to the stock selection, the alpha of debt selection all have to be covered, is a very large scientific system, system engineering, so we have not blindly done scale in the field of "fixed income +" in the past two years, mainly to make low risk, medium risk, high risk to make different display effects, so that they become clear and distinctive. In the case of a better polished basic system, it is much easier to do FOF, because FOF has a balanced strategy for long-term development.

In fact, from the head to all kinds of small and medium-sized fund companies, there are very few people who have done a particularly good balance strategy, and there have also been some risk events. Therefore, we feel that FOF is more difficult than "fixed income +", because "fixed income +" is direct penetration, direct control of assets, and FOF is a strategy, and then it has to penetrate the next layer of funds, and then penetrate assets. Of course, FOF is an area we definitely want to enter, but we must first polish the system.

Reach the threshold of 100 billion scale

It is to complete a "coming-of-age ceremony"

China Fund News: Has the development of Xinhua Fund in the past two years met your expectations, and what are the less ideal or need to be improved?

Zhai Chenxi: The development of Xinhua Fund in the past two years is basically in line with expectations, but there is still a lot of room for the future, and some aspects can be done better, one of the dimensions is innovative products. In the past year, in the field of public REITs, some leading brokerage or venture capital fund companies have stormed the city. Although we have also made a lot of project reserves, due to the great competitive pressure on the project side, we have not yet achieved a breakthrough of zero, and we will do our best to fight for it in the future.

At the same time, with the development of China's public offering industry to the ecological structure of 2.0, how to effectively adapt to the fluctuations of the capital market is becoming more and more thematic, and the rotation of the industry is becoming more and more prominent, and it is not possible to simply talk about value or growth. In the stage of economic structural transformation, it is meaningful to look at the dynamic valuation, and the valuation with growth factors is meaningful, and this is very difficult, so the next stock investment, the requirements for fund managers will be higher and higher, to do the whole market stock selection fund manager will be more and more difficult, more need to specialize, that is, in some segments of the track to study deeply, can explain the industry clearly.

We have done several things, one is to subdivide large industries, such as the establishment of a new energy group, this group not only studies photovoltaic or new energy vehicles, but also studies the whole industrial chain from upstream to downstream, because the market has a lot to do with prosperity and conduction, so it may form an investment in the industrial chain. Next, we will pilot the style of large industry grouping in this field, so that the corresponding style of fund managers can focus on doing what they are good at, which is an innovation. Another innovation is thematic investment, according to a certain representative and long-term research time of the theme event, to promote some distinctive products. For example, the two years of high global inflation, both military conflicts, geopolitical reasons, but also the contradictions arising from the process of new and old energy substitution, which is a phase of the historical problem in the entire process of resource adjustment, we plan to cooperate with index companies to launch a resource security index, hoping to launch a theme fund linked to the index in the future.

China Fund News reporter: Standing at the threshold of 100 billion yuan, what plans does Xinhua Fund have in the future?

Zhai Chenxi: An asset management company reaching a management scale of 100 billion yuan is to complete a "coming-of-age ceremony", which means entering a relatively mature stage. In the past two or three years, my main job has been to form a traction force strategically, and constantly guide everyone from the original one-man operation to team-based operation and organized operation, from the original that everyone may not believe that they can do it, to now every employee thinks that the company's scale of 100 billion is just around the corner. It should be said that we have reached the threshold of 100 billion yuan mainly rely on the stimulation of internal potential to promote the fission of the organizational ecology, which is the work of 1.0, which basically completes the reconstruction of a formed asset management institution.

After the future of 100 billion yuan, what should we do? First, in the product to form their own unique advantages, next we will launch a multi-strategy product on the absolute income track, to shine the sword in product innovation, will first innovate in the special account business, try to promote the multi-strategy absolute income target; Second, in the next year to three years, the public REITs should be built into pillar businesses; Third, in addition to active multi-strategy, it is necessary to achieve breakthroughs in the field of thematic index customization and innovation index; The fourth is international business, we are recently studying how to open overseas windows, so that more overseas investors and Xinhua Fund to form a link.

In addition, in the future, from 100 billion yuan to 300 billion yuan or even higher, there is still a lot of work to be done in the internal organizational system, assessment mechanism, talent management system, etc., including the following aspects: First, create a people-oriented working environment, let everyone's ability ceiling open the ceiling, and achieve breakthroughs; Second, with the expansion of the scale of management, gradually open the door to marketization, welcome more potential fund managers to join us, for the next step of development to build a richer talent system and foundation.