Zhai Chenxi, chairman of Xinhua Fund: Providing a stable and sustained income curve is the lifeblood of asset management institutions

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.

For more than ten years, Xinhua Fund has witnessed brilliance and encountered challenges. The "Xinhua Four Masters" were once famous and famous, and they also shined in the field of fixed income. However, the scale of the company in the past few years often hovered in the range of tens of billions, and 50 billion became an insurmountable gap.

In 2020, with the optimization of the equity structure, corporate governance was further improved, injecting new vitality into the development of Xinhua Fund. Today, although it has only been two years, Xinhua Fund's top-down systematic optimization and improvement at all levels from strategic deployment to implementation has achieved initial results.

As of the end of June 2022, the 18-year-old fund company's public offering management scale has reached a record high of 86.831 billion yuan, which has quadrupled in more than two years compared with the minimum scale of early 20 billion yuan 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 for the increase in the size of fund companies.

Providing a stable and sustained yield curve is the lifeblood of asset management institutions

Q: What is the difference from brokerage management to fund company management?

Zhai Chenxi: My career has always been based on investment, and I have indeed managed a lot of business in the experience of securities companies, such as investment, research, overseas, etc., and there has been a period of comprehensive operation and management. Overall, securities companies are a huge span system compared to fund companies, because it contains several major business sectors such as investment banking, brokerage, asset management, and investment, and each type of business has corresponding license and management requirements, and the challenge to people is also relatively large. Fund companies only have one license for asset management, that is, they must do a good job in investment and customer service, relatively speaking, it is more focused and more professional.

Q: 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. Whether it is net worth, openness and transparency, as well as the characteristics of secondary market investment, it is the most in line with the scientific development of the post-asset management era.

According to relevant agencies, the household assets of Chinese residents will double to more than 400 trillion yuan by 2030, 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 will most likely be the largest type of Asset Management Institutions in China after ten years. However, as the fund industry develops to a certain "quantitative" stage, it is now particularly worth thinking about from a "qualitative" point of view: where the fund industry needs to be continuously improved.

Q: From the perspective of high-quality development, what are the areas where the fund industry needs to be continuously improved?

Zhai Chenxi: I think the biggest challenge for us managers in the Chinese market is that at present, whether it is equity and debt investment, the type of strategy used by public funds, or the bullish strategy, this is fine when the wind is going well, but it will follow the fluctuations of the capital market. Our long-term study of the management strategies of overseas large macro hedge funds (including Bridgewater) 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 strategic needs, but the public offering industry is still dominated by bulls, so we began to try long-short strategies in the field of special accounts, as well as stocks, bonds, foreign exchange, commodities and other multi-strategy types, in fact, to explore the real absolute return.

After breaking the just exchange, the people are worried about being woolen and being cut leeks, and they are also very cautious in financial understanding. Therefore, to make customers recognize, in the end, it is still to see who can provide customers with a stable and sustainable 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, sales-driven companies, compared with strategy-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.

All of our asset management institutions should bear in mind this: the principle of asset management institutions is called trustee responsibility, they should do a good job of what they can do, do the best products and returns within their own capabilities, manage the risks you can bear in 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.

Q: How can securities companies' asset management public offering business and public fund companies do a good job in differentiated development?

Zhai Chenxi: The overall audience of securities company asset management is the sales department's own customers, mainly special account wealth management, but also the absolute return type of customers. Therefore, how to find more diversified strategies in the absolute return strategy is a difficult problem for the transformation of securities companies' asset management. 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, securities companies' asset management will go through a process from relying on channel business to relying entirely on investment and research capabilities.

The core of the public fund is how to let the original investors from the securities company asset management and bank asset management can adapt to the fluctuations of the public offering, the future with the holding period of the product will be more and more, in order to allow investors to better adapt to this fluctuation, improve the holding experience, improve the holding period, and gradually change the short-term investment behavior of the problem, so as to change the public fund "the fund makes money, investors do not make money" Problem, so in the investment research, in general, the securities company asset management to learn from the public offering, and in the holder experience, the public fund also has a lot of homework to do I don't think the two contradict each other, but in the end a benign, mutual improvement.

Q: 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 being an industry leader is not the same as the institutional pressure to climb the slope. There is a saying that is particularly good, do you rely on the ability of people or the ability of organizations? 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. We as a climbing institution managers, the company from childhood to grow up like raising children, both to enhance its organizational ability, but also to play a huge human ability, I have experienced the securities company from 80 to 30 across the 50 ranking of the entrepreneurial process, very difficult, Xinhua Fund is also experiencing from more than 70 to climb into the top 60 process, if you continue to climb forward, the effort paid is much more difficult than stable in a certain type of ranking of the institution, What sustains us to continue to overcome so many difficulties and challenges? Kazuo Inamori has a saying that says very well, 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. He (she) may have influenced hundreds of employees and the families behind them, and he (she) has also influenced all partners and all investors, so those of us engaged in the financial industry must have a sense of awe, awe of the market, a reverence for money, a reverence for the responsibility of a trustee, and effectively provide good customer service, and at the same time, in this process, we must also get our own growth, development, transformation, and sublimation.

Practice hard

The all-round systematic upgrade was completed

Q: What are the biggest highlights and progress of Xinhua Fund in the past two years?

Zhai Chenxi: I have been involved in Xinhua Fund for more than two years, and it has been a full two years since I joined the board of directors. We are very gratifying to see that Xinhua Fund has achieved a breakthrough for itself. This year is the 18th anniversary of the establishment of Xinhua Fund, which is also a veteran public fund with a long history, with a deep history and a very good performance. However, before 2020, Xinhua Fund failed to achieve a breakthrough in scale, always hovering within 40 billion, and even fell to the early 20 billion at the trough of early 2020. Why is that? It is worthy of our deep thinking. After 2020, we set a goal: 100 billion yuan in three years, and enter the top 30% of the industry in five years. Now in less than three years, we have achieved a small step towards the five-year goal in 2020, and the scale of public offering management at the end of the year reached 54.2 billion, which is also the first time in the history of Xinhua Fund's public offering management to exceed 50 billion. It will reach more than 70 billion at the end of 2021 and a record high of 86.8 billion at the end of the second quarter of this year, and our comprehensive ranking has risen from more than 70 to the top 60. Although compared with many large asset management institutions, this is only a very small progress, but for an institution that has been hovering in a certain range for a long time in the past, we have achieved self-breakthrough in 2-3 years, which is also a huge progress for Xinhua Fund.

In the past 2-3 years, most of the mainstream financial institutions, including banks and insurance, have become partners of Xinhua Fund, bringing a very strong market cooperation force, at the same time, we have also made great efforts in the Internet business, and the proportion of Internet customers cooperating with us has reached 1/3. The biggest progress of Xinhua Fund is that the comprehensive scale has increased fourfold, and it has achieved relatively large growth every year, even in the case of such a large market fluctuation in the first half of this year, it has achieved sustained growth in scale. At the same time, we always regard scale and performance as the most important parallel goals, so Xinhua Fund's performance ranking of equity and fixed income products in the past two years has always remained at the forefront of the industry.

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

Zhai Chenxi: I increasingly agree with a truth: the long-term development of a good asset management institution is not dependent on individuals but on teams, because with the changes in the internal and external environment, investment has become more and more complex, in order to manage the product well, it is necessary to have both macro, meso and micro perspectives, and every link is indispensable. Now the entire industry emphasizes star managers and still attaches great importance to potential fund managers, but if you want fund managers to grow up and maintain the sustainability of performance, the empowerment of the organization and the investment and research ability of the organizational system are more important.

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. Among them, 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 through the investment research system, from the original investment is investment, research is research, and gradually become a building block. It not only makes investment and research more integrated, more conducive to research to empower investment, but also allows more mesozoic fund managers to have the opportunity to grow up, so in the past two years, we have internally cultivated and promoted fund managers, including fund manager assistants, which is also the largest round in history.

After the verification of the past two years, we have cultivated a group of young 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.

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

Zhai Chenxi: We have regrouped in the field of investment research, so that the company's capabilities have jumped from individual capabilities to organizational capabilities. But whether a good fund manager and a good product can better reach the hands of customers requires a good market line. Therefore, in the past two years, we have also made a comprehensive optimization and upgrade in the market field, and the biggest change achieved is to split the original market department into "4+1", that is, four front-line combat teams and a middle office central department, respectively, 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 for the special needs and special risk preferences of these customers to find and build products that suit them, so in the past two years we have made a qualitative leap in the expansion and construction of the institutional customer base. 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

The importance of equity is crucial

Q: 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 the absolute return as the customer to create returns, this is what we should do the most, in the future in the long-term development of Xinhua Fund, the core goal of the pursuit is to create returns, which is not required that equity fund managers must obtain absolute returns, but to create returns for customers. We also hope that in the long run, the proportion of products characterized by absolute returns in our product categories will be higher, and in the post-new asset management era, the ability to create absolute returns will be 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 very much, but in another ten years, the changes in the top 20 or even the top 30 must be related to the company's ability to obtain absolute returns, whose absolute income business is doing well, whose comprehensive management scale will go up, rather than being characterized by a certain style. No style can last, only to create continuous returns for customers is eternal, which is also the eternal theme of the asset management industry.

Q: Is this positioning consistent with Xinhua Fund's goal of becoming a "big and comprehensive" comprehensive asset management institution? Will equity investment be weakened?

Zhai Chenxi: A fund management company, in order to have a relatively large scale, fixed income is the basis of the scale of development, but the company should develop for a long time, important performance depends on the display of rights and interests, 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, we will never waste such a good historical foundation. Therefore, equity is a sector that Xinhua Fund attaches great importance to.

Under the background of "housing is not speculation", as the real estate money-making effect gradually fades, the development of the capital market has become more and more mainstream. 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 a better return on family assets, equity assets must be allocated, and equity assets are the "winning and losing hand" that determines the performance of asset management institutions.

Q: 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: First of all, we are definitely promoting the overall growth of scale, but we must also pay attention to artistry and follow the trend in stages. In the first half of this year, the capital market was violently shaken, and in the case of huge drawdowns, Xinhua equity products passed 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 Investors on the Internet, in the first quarter, we focused on promoting low-risk assets represented by currencies and short-term and medium-term bonds, and began to prompt institutional investors, including channel customers, to increase equity assets around mid-May.

We now also require the company's investment leaders to increase the frequency of internal roadshows for marketers while investing in the external roadshow of investment and research strategy, improve the professionalism of sales transmission, and increase the transmission of professional capabilities to the sales line, which will help investors obtain better comprehensive returns and enhance the connection between retail and institutions.

Absolute gains are not something that can be done by making up a noun

Polish the balanced strategy system on fixed income +

Q: With the advent of the era of individual pension, how does Xinhua Fund layout 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. The first two years of fixed income + fire after a round, the result of this year became fixed income - . In fact, the essence of fixed income + and FOF is the same, both use the balance of equity and debt allocation 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 go up, bonds fall, economic growth slows, stocks go down, bonds go up. 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 in the first half of this year is higher than expected interest rates, 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 multi-head 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, fixed income + or FOF, there will be fluctuations, and fluctuations have different sources, more complex than pure debt and pure stocks. Only when investors better understand the characteristics of such products can they achieve better results.

Q: Xinhua Fund has always done a good job in the field of fixed income + 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 strategy of absolute returns more thoroughly on fixed income + above, and to make the layering clear in the fixed income + to understand the layering. 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; There are some customers who want 5-8% returns, can withstand 1% drawdown, called medium risk; There are also customers who can withstand 3% fluctuations as long as they have 8% returns. These three categories are fixed income +, but they are different strategies, the proportion of equity, the exposure of equity, including fixed income is short debt bottoming or participation in the long-term end, are not the same, so don't look at fixed income a "+" word, in fact, a product into a multi-wheel drive: a wheel is in bonds, a wheel is stocks, and then from macro to stock selection, bond selection Alpha 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. Failure to sort out the risk characteristics clearly can hurt investors. We mainly make low risk, medium risk, high risk, make different display effects, and make them clear and distinctive. In the case of a better polished basic system, it is much easier to do FOF, because in the end, 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 whose balance strategy is particularly good, and there are also many risk events. Therefore, we feel that FOF is one layer 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 that we must enter, but we must polish the system and enter it with greater efforts.

Reach the threshold of 100 billion scale

It is a rite of passage to complete

Q: Has the development of Xinhua Fund in the past two years met your expectations, and what are some of 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, but because the project side is facing a lot of competitive pressure, so far we have not achieved a breakthrough of zero, follow-up will do our best to strive, we feel that this field space is still very large, but also a focus on the future to focus on an area.

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, I think that now simply talking about value or simply talking about growth may be a little less in tune. In the stage of economic structural transformation, to look at the dynamic valuation, both the valuation of growth factors is meaningful, and this is very difficult, you have to be able to judge the development speed of emerging industries, so the next stock investment in the Chinese market will become more and more professional, the requirements for fund managers will become higher and higher, to do the whole market stock selection fund manager will be more and more difficult, fund managers may need more specialization, that is, in some segments of the track to study very deeply, can explain the industry clearly.

We have done several things, the first large industry grouping, gradually subdivided, for example, we set up a new energy group, this group not only research to do photovoltaic or new power vehicles, but from the upstream to the downstream of the whole industry chain to study, because the market and prosperity and conduction have a lot to do, so it may form an industrial chain investment. 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, which is representative according to the economic development process, and some thematic events that have a long research time are also studied to push some distinctive products. For example, the two years of high global inflation, both military conflicts geopolitical reasons, but also the contradictions in 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.

Q: Standing at the threshold of 100 billion yuan, what are the plans of Xinhua Fund in the future?

Zhai Chenxi: An asset management company that has reached a management scale of 100 billion yuan is the completion of a coming-of-age ceremony, which means that it has entered 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 single-person operation to team-based operation and organized operation, from the original that everyone may not believe that they can do it, to now every new and old employee believes that the company's scale of 100 billion is just around the corner. It should be said that we have come to the 100 billion period 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, which is less than 100 billion.

After standing on 100 billion, what should we do? I am also thinking about this problem, first, in the product to form their own unique advantages, next we will launch a multi-strategy product on the absolute income track, we want 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 the pillar business of the company; Third, in addition to active multi-strategy, it is necessary to achieve breakthroughs in the field of index customization and innovation index in the thematic category; The fourth is international business, our innovation group recently studied how Xinhua Fund will open the overseas window next, so that more overseas investors can see China's asset management market and form a link with Xinhua Fund.

In addition, in terms of mechanism, from 100 billion to 300 billion and even higher scale in the future, there is still a lot of work to be done in terms of internal organizational system, assessment mechanism, talent management system and so on. Including the following aspects: First, to create a people-oriented work environment, so that everyone's ability ceiling opens the ceiling and achieves a breakthrough. 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.

Q: Brain drain is a major issue facing public funds, how will Xinhua Fund respond?

Zhai Chenxi: Frankly speaking, fund companies are the most fierce competition for talents, far more fierce than securities companies and banks, and from this side, we can also see the rapid development of the fund industry. However, it is also because the industry is developing particularly fast, and the talent training mechanism is a bit unable to keep up with the development of the industry, so that the situation of mutual poaching between industries will be particularly prominent. However, digging people can only solve short-term problems, and to create a platform for the company's talent training is the prescription to solve the core problem of insufficient talent. This is also why in the past two years or so, we have not been very anxious about the matter of "people", nor do we have to dig up many fund managers outside, but instead we are cultivating internal skills, optimizing the organizational system, forming group operations, and at the same time looking for and cultivating potential talents inside. Only by planting the roots deeper can our tree grow taller. External talents are more supplemented, and the fundamental lies in whether the company's own talent training system can withstand it, which I think is the core of alleviating the talent problem. （CIS）