How is the public offering and wealth management of foreign investors in China doing in 2023?

In 2023, China's bond market will usher in a bull market, while the stock market will fluctuate and fall, which will make foreign asset management institutions operating in China face challenges, and expanding their scale has become the main task.

Among them, it is almost difficult for foreign-funded public funds to issue stock funds, and for the time being, bond funds are used on a large scale; foreign-funded wealth management has also changed the strategy of differentiating itself through active equity management in the early years, and has accelerated the issuance of stable bond wealth management products.

According to the incomplete statistics of the first financial reporter, up to now, the scale of the Luberger Berman fund has reached 10 billion yuan, the largest of the newly established foreign-funded public funds, mainly bonds; the scale of the BlackRock fund is close to 7 billion yuan, with stocks and bonds accounting for half of each; the scale of the Fidelity fund is slightly more than 5 billion yuan, mainly special account interest rate bonds; and the scale of the Schroder fund, which just issued its first fund in December, is about 1 billion yuan, and it is only a bond at present.

In contrast, foreign wealth management with the support of major Chinese banks is in a more advantageous position. As of November, the scale of HSBC Wealth Management, BlackRock CCB Wealth Management, Schroder Bank of Communications Wealth Management, Goldman Sachs ICBC Wealth Management and French Barria Agricultural Bank Wealth Management were 27.212 billion yuan, 11.395 billion yuan, 9.921 billion yuan, 2.73 billion yuan and 3.5 billion yuan respectively. However, wealth management companies are facing the same pressure at the end of the year.

The public offering of foreign capital has accelerated the expansion of the bond issuance base

At present, the popularity of A-shares has yet to recover, and the channels with great voice (bank personal finance, brokerage wealth management) are more conservative about the issuance of equity products, and the demand for bond products that perform better this year is greater.

Since November, Fidelity, Schroders, and BlackRock have announced the issuance of bond bases, of which Fidelity has completed the fundraising. The "Fidelity Yuda Pure Bond" fund was issued from November 1 to November 21, with a total subscription amount of more than 5 billion yuan. However, according to the reporter's understanding from people familiar with the matter, the bond-based strategy is mainly based on short-term interest rate bonds, focusing on a conservative line. In addition, Fidelity issued an equity fund in April this year, but the current scale is less than 1 billion yuan, with a net value of about 0.85.

BlackRock Eversheds 30-day holding bond securities investment fund was launched on December 4. BlackRock's positioning of the fund is a pure debt fund that takes into account both income and liquidity, does not involve in stocks or convertible bonds, and is committed to becoming the choice of investors to allocate assets or spare money management. According to the reporter's understanding from the channel, because the product style is conservative and relatively short-term, it sold nearly 4 billion yuan at that time, which is rare at the end of the year.

The earliest BlackRock fund issued three equity products in the fourth quarter of 2021 and 2022, BlackRock China New Vision Hybrid, BlackRock Hong Kong Stock Connect Vision Hybrid, and BlackRock Advanced Manufacturing One-Year Holding Hybrid, with net values of 0.5683, 0.6546, and 0.8194 respectively so far. At present, BlackRock Fund has 7 products as a whole, with a total scale of nearly 7 billion yuan.

The Schroder Hang Seng Bond Fund was also launched on 4 December. However, unlike the above two, Schroders' bond style is slightly aggressive, and this time it focuses on the "80+20" hybrid strategy, that is, "no less than 80% of bonds + no more than 20% of equity assets". The agency said that the new product will focus on high-grade credit bonds, consolidate the underlying income of the portfolio, and provide high-quality liquidity. Earn bond capital gains through swing operations and duration strategies, manage equity positions with equity ETFs, and flexibly capture opportunities for market style switching and sector rotation. According to the reporter's understanding, the institution will soon plan to issue an A-share fund.

Neuberger Berman funds issued bond products in February, September and December this year. In September, the Neuberger Berman China Green Bond Securities Investment Fund raised 2.194 billion yuan. Wind data shows that this is the largest actively managed green bond theme public offering fund in China, the latest issuance of Neuberg buy China select interest rate bonds on December 11 is more than 4 billion yuan, the institution issued on February 27 this year after the opening of the first product for the Neuberger Berman escort one-year holding period bond securities investment fund, the scale of which exceeded 4 billion yuan, the current net value of 0.9864. At present, the total scale of Neuberger Berman has exceeded 10 billion yuan, making it the largest new foreign fund.

In addition to the above-mentioned equity products, the institution also issued two equity products in May and December respectively - Neuberger Berman China Opportunity Mix (current net value of 0.904, scale of about 500 million yuan) and Neuberger Berman China Medical and Health Equity Institutional Initiation Fund (scale of about 40 million yuan).

On the whole, the expansion of bond products is still the main strategy of foreign funds, and the issuance of equity products still depends on the recovery of risk appetite of channel parties and the recovery of the stock market.

Foreign wealth management leverages the channels and strategies of major banks to be stable

In the past two years, the wealth management market has experienced a painful period of growth – first facing the challenge of net-worth, and then the redemption wave triggered by the collapse of the bond market in the fourth quarter of 2022. In this process, the challenges faced by foreign-controlled wealth management companies that have just been established and do not rely on non-standard safety cushions at all are particularly prominent. However, the advantage of foreign wealth management over public funds is that the former enjoys more channel advantages from the joint ventures of large state-owned banks.

At present, wealth management companies are more clear about the product attributes of "stable" or "deposit substitution", and for a long time in the future, fixed income assets will account for more than 90% of the proportion, and QD US dollar deposit products will also begin to rise in 2023. From 2021 to the first half of 2022, many newly established foreign wealth management companies are still actively issuing hybrid products and equity quantitative products, but they have become more and more rare since then.

For example, the earliest opening of HSBC Wealth Management focuses on multi-strategy products and fixed income + products, in order to do high returns, many products have a closed period of 1~3 years, and the scale of the institution once exceeded 70 billion yuan in 2022, but due to the impact of the bond market earthquake and the downturn of the stock market in the fourth quarter of the same year, the scale dropped to 50 billion yuan at the end of the same year, and it is currently less than 30 billion yuan.

Taking BlackRock CCB Wealth Management as an example, by June 2023, the company will have been in operation for 2 years, and its scale will exceed 10 billion yuan. At present, it is the only foreign-controlled joint venture wealth management company selected for the pilot of pension financial management. As early as the beginning of its establishment in September 2021, BlackRock Jianxin debuted in the "equity" style, and in the wealth management market at that time, which was "full of 'fixed income +'", the institution's first product launched a stock product with a risk level of up to "R5", and the minimum investment threshold was as high as 100,000 yuan. This product focuses on the systematic active equity investment strategy that BlackRock is good at overseas, similar to the index enhancement strategy linked to the CSI 300. At that time, the scale of product fundraising exceeded 2 billion yuan, and in 2023, a pilot pension financial management product with the longest closed period in the whole market (closed period of 10 years) will be issued.

However, since 2023, with the arrival of the new general manager Fan Hua, the agency has also changed its strategy. As the equity market has fallen into a state of continuous shock, fixed income+ or pure debt products have become the mainstream in the past year. Since 2023, thanks to the continuous launch of the Beiyu series of credit bond products, the scale of BlackRock CCB has exceeded the 10 billion yuan mark in the second quarter, and the institution has also issued cross-border US dollar deposit wealth management products after obtaining the QDII quota.

The two wealth management companies that opened in 2023 have also begun to adopt a more conservative strategy, with fixed income assets accounting for the absolute majority. For example, the fifth joint venture wealth management company, FA Banong Wealth Management, issued its first wealth management product on October 25 - "FA Banong Wealth Management Enamel Blue Series Fixed Income Closed-end 2023 Issue 01", focusing on stable and low-volatility pure fixed income products, 100% invested in fixed income assets such as money market instruments and bonds, and used hybrid valuation method for valuation. When the market fluctuates, the hybrid valuation method can make the fluctuation of the net value of the product smoother than the market value method. However, on this basis, in order to strive for income and superimpose the current favorable environment for bonds, institutions still allocate assets, including urban investment bonds, in order to grasp the window period of credit bonds. In the context of chemical bonds, the market of urban investment bonds is hot this year, and the first product was sold out within 30 hours with a quota of 2.5 billion yuan. Subsequently, another similar strategic product was also sold, nearly 1 billion yuan.

Schroder Bank of Communications Wealth Management also focuses on fixed income products. In addition, due to the popularity of US dollar assets in the past year, the institution issued the "QDII 6-month closed 2303" on December 12, in which the assets are mainly US dollar deposits.

For the future financial investment strategy, Liu Rui, the proposed chief multi-asset investment officer of BlackRock CCB Wealth Management, recently told reporters that since September, the short-end interest rate of bonds has risen more than the long-end, due to the gradual introduction of real estate policies, the active force of loose finance, and the increase in bond supply, which has suppressed the long-term sentiment of bonds. However, at present, the short-term and medium-term varieties of the callback have been more sufficient, and the follow-up callback risk is controllable, and it is still recommended to pay attention to the short- and medium-term high-grade credit bonds; as far as the stock market is concerned, the recent overseas interest rate hike expectations and geopolitical risks are also weakening at the margin, and the valuation preference of risk assets is expected to gradually increase, and it is still recommended to "low-wave + technology growth" as the main allocation, mainly including non-ferrous metals, communications, AI industry chains, etc., such as biomedicine, consumer electronics and other dilemma reversal sectors are also worth paying attention to.