China Fund News reporter Fang Li Cao Wenjing
The twists and turns of 2023 are coming to an end, and the year 2024 full of expectations is coming.
At present, under the impact of multiple factors at home and abroad, the Shanghai Composite Index is still around 3,000 points. How should fund investment be distributed next year? How should active equity funds be screened? Which varieties are more worth optimizing?
To this end, a reporter from China Fund News interviewed seven FOF fund managers who are "professional buyers" of the fund to provide advice for the layout of public funds in 2024. They are:
Li Wenliang, General Manager of FOF Investment Department and Fund Manager of China Southern Asset Management
Lei Min, Deputy Director of Asset Allocation and FOF Investment Department of China Merchants Fund
Gao Ying, Director of Pension Investment of Ping An Fund
Xiao Kanning, Investment Director of Yinhua Fund FOF
CITIC Prudential Pension 2035 Three-Year Holding Hybrid FOF Fund Manager Li Zhengzheng
Great Wall Hengkang Stable Pension One Year Mixed FOF Fund Manager Xu Liheng
Chuangjin Hexinjia and balanced 3-month holding period FOF fund manager Luo Shuixing
These investors believe that the current point in time ushered in the strategic layout of equity assets, especially from the perspective of medium and long-term funds, the equity risk premium to measure the cost performance of stocks is at a historical high, the risk compensation is more sufficient, and the counter-cyclical layout is expected to accelerate the formation, and in 2024, we can gradually pay attention to the assets with rights, but we should pay attention to the timing and rhythm of the layout. In addition, "fixed income +" funds, gold funds, quantitative small-cap funds, etc. are also optimistic.
These people also suggested that investors should not chase after the market when the crowd is buzzing, nor should they leave the market when they are pessimistic and negative, and try their best to overcome the weaknesses of human nature, think in reverse moderately, and look at the market rationally.
The medium and long-term investment in the stock market is more cost-effectiveChina Fund News: This year, the market is volatile, the industry rotates rapidly, and hot spots are frequently switched. Looking forward to next year, how will you allocate large types of assets, and which types of assets will be more cost-effective to invest in stocks and bonds?
Li Wenliang: We are generally optimistic about the future performance of equity assets, and recommend overweight equity assets and underweight fixed income assets in terms of asset allocation.
We are full of confidence in the future market trend due to three main reasons: strong policy protection for the economy, further enhancement of the attractiveness of A-share valuation, and structural changes in the effectiveness of the construction of a high-quality development system from quantitative to qualitative. The resonance of these three factors can help strengthen the confidence of the capital market and enhance investors' long-term return expectations.
Objectively speaking, investors after three years of volatility will inevitably have a certain pessimism, such expectations are often linear from a historical point of view, and from the trading volume, fund issuance and other data, it is now in a more suitable allocation range in history - taking the CSI 300 index as an example, the stock and bond price performance index touched two standard deviations and ran at a low level, suggesting that the stock market is in a suitable allocation position compared with the bond market.
Therefore, the positive trend of the macro economy and capital markets has not changed, and we have every reason to believe that the recovery of market confidence is a logical process. In this process, if the real estate chain and the capital market are further given corresponding policy support (Beijing and Shanghai have recently issued relevant policies for active second-hand housing transactions), it will help to reverse the pessimistic expectations of investors, thereby injecting stronger confidence into A-share investment, and the stable and healthy development of the market will also create more opportunities and value for investors.
Luo Shuixing: Considering the expected slowdown of global economic momentum, combined with the domestic macro environment, it is more inclined to increase equity assets after the pressure on debt clearance eases, the effect of stabilizing growth is more significant, and market expectations begin to bottom out.
It is expected that the focus in the first quarter of next year will still be on bonds, precious metals and commodities, waiting for the policy signals and market conditions released by the two sessions next year to moderately increase the allocation of equity, and gradually pay attention to equity opportunities in the second quarter. On the whole, the rhythm is more important than the trend judgment of the whole year, and it is a better choice to defend first and then choose the opportunity to attack.
Li Zhengzheng: Looking forward to next year, changes in the global industrial chain pattern may still give rise to regional restructuring. If the domestic manufacturing industry continues to be in the stage of inventory depletion and capacity clearance, and the credit cycle continues to be in the weak credit stage, economic growth may show fluctuations and bottom. A balanced neutral strategy will be adopted for the allocation of large asset categories, and the allocation of stocks and bonds in the asset portfolio is similar to that of the benchmark portfolio. If domestic and foreign demand resonates, export growth picks up, and the credit cycle turns expansionary, economic growth is expected to pick up. The allocation of large types of assets tends to be balanced and positive, or whether to overweight stocks and underweight bonds. Excluding the micro-liquidity of financial markets, equity assets are significantly more cost-effective. Lei Min: Although A-shares are still in the stage of shock and bottoming out at the current stage, looking forward to the negative factors that suppress the market in the coming year, it is expected that there will be positive changes, and A-shares have significant investment value from a cross-cyclical perspective. In terms of asset allocation, stocks are more cost-effective than bonds, so it is recommended to appropriately seek income from equity assets on the basis of stable assets in fixed income.
The specific ratio of stocks and bonds needs to be determined according to the product situation, for stable products, you can gradually increase the allocation of equity, for aggressive products, you can consider overallocating equity at the bottom of the market, and by bearing appropriate fluctuations in exchange for long-term greater income space.
Gao Ying: At the current point of view, medium- and long-term equity assets are more cost-effective than bond assets. Xu Liheng: Asset allocation focuses on diversification and strategy. At this point in time, there is an opportunity for the strategic layout of equity assets. First, from the perspective of cross-border funds, the interest rate differential between China and the United States is expected to continue to converge from a high level, and the attractiveness of RMB assets will gradually increase, and the valuation of A-shares is at a historical low and has room for repair; second, from the perspective of absolute return funds, after a round of compression of credit spreads, the allocable bond assets with higher yields will decrease, the bond yields will not be enough to cover the cost of debt, and the attractiveness of the parts of equity assets with higher dividend rates or more stable earnings will increase; third, from the perspective of medium and long-term funds, the equity risk premium that measures the cost performance of stocks is at a historical high, the risk compensation is more sufficient, and the countercyclical layout is expected to accelerate。 Xiao Kanning: In terms of risk assets, the investment target will be mainly equity fund products, through a combination of quantitative and qualitative allocation, selection and monitoring of investment varieties, tracking and striving to surpass the partial stock fund index, and strive to obtain the average market return and relatively stable excess return; in terms of stable assets, at the current point in time, the market is at the bottom of long-term investment, so it will use "fixed income +" funds to replace pure debt products, in order to pursue thicker returns. Optimistic about "fixed income +", gold funds and other products
China Fund News: Standing in the current layout of the market outlook, what kind of funds do you prefer (such as fixed income +, cargo base, gold funds, QDII, ETFs)? Li Wenliang: We tend to allocate more equity or rights-bearing assets, especially after the market has been adjusted for about two years. Among the weighted assets, you can consider the hybrid "fixed income +" products of partial debt or absolute income products with a certain equity allocation, including secondary debt base and primary debt base with good asset allocation ability, in order to further increase the ability of the portfolio to reap the upward income of equity assets.
According to the U.S. economy is about to slow down, the Federal Reserve's interest rate hike cycle is basically over, the global real interest rate will have a significant downward judgment, gold and other precious metals will fully benefit from the economic downturn and liquidity easing pattern in developed economies, gold ETF is also a good allocation direction.
Luo Shuixing: In the short term, one or two quarters will be inclined to gold funds and QDII products, the global monetary tightening is expected to reverse, and gold is in the late stage of a major rising wave, and there is still a certain probability that there is still some room for income, which is relatively an active defensive variety. The logic of the layout of QDII is similar, and the overall situation is in the Fed's easing expectation pricing stage, which has a valuation market. Li Zhengzheng: After the great expansion of global credit currency, gold is a financial instrument to resist the depreciation of credit currency. In addition, the US real interest rate and the dollar cycle are the key variables affecting the trend of gold prices, and the current Fed has weakened its interest rate hike expectations, and some economic data that restricts the Fed's interest rate hikes (new non-farm payrolls, unemployment rate, inflation, core inflation, etc.) may become the driving force for the volatility of gold assets, and vice versa. Lei Min: We are relatively optimistic about "fixed income +", gold, ETFs and other products.
First, "fixed income +" products may be better layout varieties in 2024. We can not only pursue the steady income brought by bonds, but also appropriately seize the structural opportunities in the equity market and strive to achieve a certain increase in returns. Second, the Fed's policy inflection point has arrived, and the rate cut window will begin in 2024. Gold prices have historically had an inverse correlation with US real interest rates, and while the asset has already made good returns in 2023, it is expected to perform well in 2024. Third, in recent years, ETF products have continued to grow and develop, and the layout of ETFs has become more comprehensive and extensive, so that we can better grasp various investment opportunities.
Xu Liheng: Optimistic about index enhancement funds and "fixed income +" funds. Index enhancement is an alternative to balanced funds, which can achieve portfolio management in a more systematic way through quantitative and other means, and the style exposure is more in line with the market benchmark, and the excess return is more uniform in the time dimension. In the end, the risk-adjusted return is better, and it is suitable as a bottom-position allocation. The "fixed income +" fund is the choice to participate in the equity market in a stable way. Xiao Kanning: We pay more attention to quantitative funds with a more balanced allocation. Balanced allocation of value growth
China Fund News: Active equity funds are still the focus of the people's attention, looking forward to 2024, how do you make a layout?Which types and styles of funds are more optimistic about you?Value or growth?Li Wenliang: In 2023, some sectors in the growth and value style will perform better, such as the TMT industry in the growth style and the low valuation dividend style in the value style. The market style is likely to continue to be balanced in 2024, with both technology growth and pro-cyclical sectors performing. In terms of structure, sectors that tend to represent economic structural transformation, high-quality development, and earnings growth supported by performance are expected to perform better.
Luo Mercury: Before the economic expectations have not materially reversed, the growth of the structural market, small and micro cap quantitative funds will be more focused on the bottoming out of the value cycle style if the economic recovery expectation and the substantive effect of the policy are more obvious. Li Zhengzheng: The current external environment is still constrained, the domestic economic recovery is less than expected, the inventory cycle is in the passive destocking and active replenishment, and the value style is likely to continue. However, a new round of scientific and technological revolution and industrial transformation may have arrived, and the social productive forces and production relations of all countries in the world will face new changes. Growth styles should not be overlooked, so it may be a good idea to maintain a moderate balance of growth and value. Lei Min: We adhere to the concept that excellent active equity funds can create value in the long run. In terms of style, we believe that the sources of opportunity in the subsequent market will be broader and more balanced in structure. On the one hand, technological growth and industrial upgrading are important investment directions in line with the high-quality development stage, which deserve continuous tracking and attention; on the other hand, in the context of the decline in the potential return on investment of the whole society, high-quality assets with stable income are still scarce, and value assets are also worthy of long-term attention. Gao Ying: Looking forward to 2024, it will still be a structural market, and there will be opportunities for allocation in both value and growth style. Xu Liheng: If the macro economy improves further and market confidence recovers, the growth direction will be more flexible. One is the core assets, with the competitiveness of enterprises as the fundamental selection criteria, after a long period of digestion, the valuation of such assets is gradually reasonable, and the pressure of chips has also been released to a certain extent. The difficulty lies in the fact that in the process of globalization and rapid changes in the economic structure, the connotation of core assets will change. When choosing such a fund, more attention will be paid to whether the fund manager's investment research can be better oriented to the future, rather than the past.
The first is cyclical growth, which is dominated by cyclical industries, because companies are facing certain operating pressures and valuations are also suppressed, such as further macroeconomic improvement in the future, or growth elasticity. At present, it may have the characteristics of contrarianism, which is an extreme test of the fund manager's ability to withstand pressure.
Xiao Kanning: We pay attention to the balanced allocation of growth and value style, and on this basis, we will make a certain tilt in a certain direction according to the specific development of the market.
In 2024, QDII will now diverge
China Fund News: QDII funds occupy the "C position" of the 2023 annual results, do you think the strong situation will continue into 2024? Li Wenliang: The overall performance of QDII funds this year is better, but there may be divergence next year. In particular, after the U.S. economy enters the interest rate cut cycle, there is a high probability that the global economy will enter a divergence, and QDII funds with strong fundamentals in the region are expected to perform better, including India with engineer dividends and Vietnam with continuous urbanization.
Luo Mercury: Considering the relative advantages of cyclical dislocation, at least in the first half of 2024, the strength of QDII may be able to fly for a while, and at this stage, in terms of QDII investment, the focus of the sector can be changed from technology to a more balanced allocation, and we can pay attention to the rebound opportunities in the US real estate and consumer sectors. Li Zhengzheng: The good performance of QDII is due to the continuous easing of the US fiscal weight, the hot new technological revolution and the strength of the US dollar index, and the above factors may be dulled or even reversed next year. Past experience shows that the most dominant direction in the current year tends to be ranked lower in the second year's return order, which is consistent with the mean reversion characteristics in the long run. In addition, the valuation of U.S. stocks is not low, and although the growth characteristics of technology stocks have allocation value, it remains to be seen whether profit growth can absorb their valuations. Therefore, we are not optimistic about a continued strong performance.
At present, the market has expected the Federal Reserve to cut interest rates next year, and the downward trend of U.S. Treasury yields may be relatively clear, and the value of medium-term allocation in the future is obvious. Therefore, the US dollar index and US bond yields should be prepared to fall from high levels, and QDII US bonds and gold funds may perform next year.
Lei Min: In 2024, the U.S. economy will face certain recession risks, and the valuation of U.S. stocks will be at a historic high, and volatility may increase significantly in the future. There is also a lack of bright spots in the eurozone's economic growth. At present, the valuation of the Hong Kong stock market is extremely low, below the historical minus one standard deviation, and the AH premium index is at a historical high of more than 150. On the fixed income side, you can pay attention to U.S. bond funds, which are expected to benefit from the end of the current interest rate hike cycle and the decline in U.S. bond interest rates. Gao Ying: Whether the strength of QDII funds can continue into 2024 depends on a variety of factors, including global economic conditions, monetary policy, geopolitical risks, etc.
As the global economy recovers, some emerging market and developing economies are likely to continue to maintain rapid growth, and some technology sectors may also have good investment prospects, such as artificial intelligence, cloud computing, biotechnology, etc.
Xu Liheng: Due to the differences in factor endowments in various countries, the advantageous industries are not the same, and the cross-border allocation is ultimately to realize the allocation of the advantageous industrial chain, and the core is the competitiveness of the companies and their profit distribution pattern in the industrial chain. At present, we are focusing on whether some mature economies can continue to maintain competitive advantages in fields such as technology and biomedicine, and if some emerging market countries can undertake industrial relocation and provide products at lower costs. Active equity funds that have released most of the risks are expected to usher in net value restorationChina Fund News: The three-year rolling return of the active equity fund index has approached the historical extreme value of the past 15 years at the lowest point at the end of October this year. What do you think of this phenomenon, what is the reason for it, and is it going to continue?
Luo Shuixing: Behind the performance of the stock market and funds are economic development, industrial trends, listed companies, industrial technological changes, investor protection systems, listed company quality, profitability, shareholder returns, corporate governance, financing systems, shareholding reduction regulations and other more essential things. Only when the macro environment is friendly, the institutional environment is guaranteed, the economic growth is flexible, the industrial technology is breakthrough, and the new industry is rising, everyone expects to be stable, less game mentality, and more investment mentality, and the market will develop healthily. Li Zhengzheng: This phenomenon reflects the lack of money-making effect in the A-share market in the past two years, and the rolling income of the overall equity market is at the historically low percentile.
Personally, I believe that the reason for this phenomenon is that the market has changed from increment to stock mode, the scale of active equity funds has shrunk, and the issuance of new bases has cooled. The excess of the large market relative to the small market is positively correlated, the core assets continue to pull back due to the weakening profitability and foreign capital outflow pressure, and the three-year rolling return of the large market growth style is also at a historical low. The transformation of this phenomenon requires the observation of the inflow of new funds in the market, the improvement of the profitability of listed companies with the recovery of the economy and prices, and the adjustment of the investment strategy and style of active equity funds.
Lei Min: The sharp decline in the rolling returns of the active equity fund index in the past three years may be related to the core asset bubble process from 2019 to 2020, which has now experienced more than two years of market adjustment and valuation digestion, and has released most of the risks. If we look at the long-term dimension, the 10-year rolling annualized return of active equity funds still fluctuates around the 10% center, and the current three-year rolling annualized return has fallen to about -7%, so from the perspective of the law of mean reversion, we do not believe that this process will continue, although the current market sentiment is flat, but judging from multiple dimensions such as valuation, policy, and fundamentals, active equity funds are expected to usher in a certain net value repair in 2024. Gao Ying: This phenomenon indicates that the market's expectation of investment returns for active equity funds is changing, and investor sentiment may be pessimistic. The current market environment is in a correction phase, which may be the reason for the low three-year rolling return of the active equity fund index, and the strategy and operation of the fund manager will also have an impact on the fund's return. As for whether this phenomenon will continue, it is difficult to make a clear judgment, but the market is running to the current position, the valuation is in the extremely undervalued area, which has been fully factored into the pessimistic expectations, and the cost performance of medium and long-term equity has been significantly improved. It is necessary to pay attention to the risk points such as the weakening of the overseas economy and look at the market rationally Thinking about the reverse thinking China Fund News: In your opinion, what risks should be paid special attention to in 2024? What advice do you have for investors? Li Wenliang: From the perspective of risk, entering 2024, the Federal Reserve may enter a cycle of interest rate cuts, which corresponds to the marginal weakening of the U.S. economy, which may have some negative pressure on companies in the domestic export chain, and the corresponding sectors should also pay attention to risks. From an investor's perspective, it is important to avoid chasing higher overseas assets, especially after the overseas economy has weakened significantly.
Luo Shuixing: The slowdown in global economic momentum, the pressure of debt clearance, and the risk of geopolitical games need to be paid attention to, and at the transaction level, we need to pay attention to the risk of continuous decline in market liquidity and activity. Considering the global uncertainty, it is not too late to see more and move less, reject the mentality of excessive games, and wait for the trend to gradually become clear. Li Zhengzheng: Investors may pay attention to the following risks: the impact of the process of risk resolution such as the weakening of the overseas economy, the growth of domestic domestic demand and real estate on the domestic economic growth and the improvement of corporate earnings, which will then determine the profitability and sentiment repair of the equity market; Lack of industry trend opportunities and other problems, emotional operation may bring large losses. It may be possible to maintain a balanced allocation, pay more attention to the structural changes and medium- and long-term prospects of the industry, and avoid short-term speculation and chasing up and down. Lei Min: Overseas, we need to pay attention to the slope of the US economic downturn and the changes in China-US relations before and after the US election. Domestically, it is necessary to pay attention to the improvement of the real estate problem and the process of turning local government debt into debt.
It is hoped that investors will not chase higher when people are buzzing, nor will they leave the market when they are pessimistic and negative. When the market reaches a strong consensus on some factors, it often means that the market has been priced more sufficiently, try to overcome the weaknesses of human nature, think backwards appropriately, look at the market rationally, and examine investment opportunities from a longer-term perspective, so that it is possible to reap the ideal investment returns
Gao Ying: Abroad, the main ones are geopolitics and Fed policies, while the domestic side is mainly the economic situation and the recovery of residents' consumer confidence. Xiao Kanning: Investors with a lower risk tolerance can choose fund products with a more balanced balance of stocks and bonds to control portfolio volatility. Investors can also participate in fund investment in the form of regular investment to reduce the risk of timing and further smooth market fluctuations.
Editor: Xiao Mo
Review: Muyu