China-Singapore Jingwei, April 18 (Xinhua) -- The scale of financial management reduction in the first quarter was lower than that of the same period in history, and the performance of long-term products was significantly inverted
Author: Liu Yu, Chief Economist of Huaxi Securities
Tian Lemeng is the chief macro analyst of Huaxi Securities
The scale of wealth management returns in the first quarter was smaller than that of the same period in history
Since 2024, the bond bull market has been deduced, the A-share market has also recovered, and the wealth management industry has taken advantage of the trend to achieve rapid expansion, with the scale exceeding 28 trillion yuan at the end of February. In March, affected by the seasonal return to the balance sheet, the scale of wealth management declined.
The overall scale of wealth management in March was lower than the historical average, which is due to the fact that credit in March may be weaker than that of the same period in history, and the parent bank's demand for return to the balance sheet is not strong, and on the other hand, due to the recovery of earnings after the Spring Festival, under the influence of the "income effect", the scale will be actively expanded.
The probability of credit exceeding the seasonality in March is not high, and the pressure on the debt side of the parent bank may be correspondingly lower than that of the same period in previous years, and the demand for the return of wealth management scale is not large. The fundamental purpose of the wealth management statement is to meet the liquidity assessment of the parent bank at the end of the quarter, and this demand depends to a certain extent on the strength of credit supply. When credit supply is strong, it may correspond to greater pressure on passive redemption of wealth management, and vice versa. Under the habit of "early delivery and early return", the amount of credit in the first quarter of recent years has been relatively large, corresponding to the decline in the scale of wealth management in March, June, September and December (all quarter-end months).
However, the central bank's monetary policy implementation report in the fourth quarter of 2023 clearly stated that "unfair competition, 'rushing time' and other unreasonable credit delivery", combined with the performance of the first quarter of 2024, the effect of credit smoothing has appeared. Looking ahead, part of the pressure in the first quarter may be apportioned backwards, and the scale of wealth management at the end of the quarter may tend to be relatively balanced.
In addition, in the context of the high performance of the stock and bond markets after the Spring Festival, wealth management products have achieved better performance returns, and the yield on deposits has been continuously reduced, further highlighting the relative advantages of wealth management income, or providing support for scale expansion.
The performance of the minimum holding period type products is outstanding
The minimum holding period product combines the advantages of closed-end and daily opening products, and stipulates a period of lock-up period of funds, which will automatically switch to daily opening after expiration. This mechanism not only allows wealth managers to focus on longer-term value investing, but also meets the liquidity needs of customers, with stability and flexibility. From the perspective of extending the period, this type of product has maintained a high expansion rate since the first quarter.
In terms of specific institutions, the wealth management sub-of joint-stock banks has made significant efforts, with an increase of 418.8 billion yuan to 2.2 trillion yuan in a single quarter, followed by the wealth management sub-of state-owned banks, with an increase of 221.8 billion yuan. Among the top 10 institutions in terms of growth, there are 7 wealth management subsidiaries of joint-stock banks, and the remaining 3 are wealth management subsidiaries of state-owned banks. Among them, BOCOM Wealth Management ranked first in the quarter-on-quarter growth, increasing by RMB109.5 billion from the end of 2023 to RMB611.6 billion, followed by Everbright Wealth Management, IB Wealth Management, Minsheng Wealth Management and SPDB Wealth Management, all of which grew by more than RMB50 billion. Among them, Everbright Wealth Management and SPDB Wealth Management mainly rely on the performance income of equity assets to achieve expansion, and the proportion of equity products in their products with a minimum holding period is close to 90%, while IB Wealth Management mainly focuses on fixed income products, and its Tianli series products obtain stable income through the allocation of deposits and highly liquid bonds, achieving better scale growth.
The performance benchmark of short-term products is declining. From the perspective of statistical intervals, since March 2023, the lower limit of the performance benchmark at both ends of the length of products with a minimum holding period has changed, and the decline of products with a short holding period has been more obvious. As of March 2024, the lower limit of the performance benchmark of products below 2 years is distributed in the range of 13bp (basis points) to 25bp, of which the cumulative decrease of 13bp to 4.30% for the 1-2 year period is 13bp, and the decline of 25bp for products of 1 month and below has decreased from 2.75% in March 2023 to 2.50% in March 2024. Contrary to the short-term trend, the performance benchmark of longer-term products with a term of more than 3 years has increased instead of decreasing, with a cumulative increase of 37bp to 4.40% compared with March 2023, which may reflect to a certain extent that investors' preference for liquidity is still strong, and the demand for income compensation for products with a long capital occupation period is also increasing.
The performance of long-term products is obviously inverted
Comparing the annualized income with the lower limit of the performance benchmark since the quarter, it is found that the performance compliance rate of wealth management products with a short holding period is better than that of a long term. The product performance compliance rate within 6 months is more than 60%, of which 1 month and below, 3-6 months, the compliance rate is more than 70%, and 1-3 months is 67%, while the compliance rate of the lock-in period is more than 1 year, but less than half.
We take the representative March as the observation point and compare the annualized return of the wealth management range with the median expected rate of return (the lower limit of the performance benchmark) and find that the current long-end products are facing greater performance pressure. Specifically, except for the daily opening products, the actual rate of return of the rest of the products is lower than the lower limit of the performance benchmark, and the performance inversion of long-term wealth management products is more significant. As of March 29, the daily open products were basically the same as the performance benchmark at 2.4%, the rolling annualized rate of return of the fixed-open products with a relatively long duration in the past 1 month was 2.9%, a difference of 52bp from the lower limit of the performance benchmark, and the actual rate of return of the closed-end products was 3.5%, which was also lower than the 3.6% of the performance benchmark. The performance of the minimum holding period product in March was relatively better than that of the long end, with an annualized return of 2.8%, which was only 8bp worse than the performance benchmark. In the sale, the performance benchmark of wealth management products is often used as one of the publicity methods to attract customers, and the large gap between the actual rate of return and the expected return may bury the hidden danger of redemption risk for wealth management.
Further, among long-term wealth management products (closed-end and fixed-opening), the performance pressure of product types with long maturities is relatively large. Specifically, the actual performance of closed-end products with a maturity of less than one year is better than the lower limit of the performance benchmark, while the revenue of products with a maturity of more than one year begins to invert, and the longer the maturity, the greater the distance from the lower limit of the performance benchmark. As of March 29, the actual annualized return of closed-end products over 3 years was 3.5%, far less than the 4.8% of the performance benchmark, and then the 2-3 year and 1-2 year periods, which were 33bp and 21bp different from the performance benchmark. Similarly, the inversion of short-term products with a maturity of less than 1 year is relatively small, ranging from 6bp to 36bp from the performance benchmark, while the actual income of the 2-3 year period is 3.2%, which is 108bp lower than the performance benchmark.
From the perspective of increment, the performance benchmark of various wealth management products has declined marginally. We select wealth management products (including new products) that have achieved positive growth in scale in the first quarter, and use the incremental scale within the interval to weighted the lower bound of the performance benchmark. On the whole, the lower limit of the performance benchmark corresponding to the incremental part in the first quarter was significantly lower than the average of the stock, and the difference between the closed-end products was the largest, and the lower limit of the benchmark of the increment was 3.1%, which was much smaller than the average of the stock of 3.6%. For the rest of the products, the incremental weighted performance benchmarks of fixed-open, minimum holding period and daily open-type products are 10bp-20bp lower than the average stock.
Combined with the above analysis, the income pressure caused by the scarcity of high-yield assets has become the main problem faced by financial management. The lower limit of the performance benchmark has shown a downward trend for both existing and new products, although more than 82% of the existing non-current AUM performance benchmark in the market still exceeds 2.5%. At the same time, subject to the pressure on the sales side, the speed and extent of the financial management to continue to reduce the performance benchmark are also limited, and the performance pressure will continue in the short term.
In addition, the future regulatory factors may be potential disturbances to fluctuations in the scale and performance of wealth management. According to media reports, the supervision of trust products may become stricter, and the space for asset management products to take advantage of the trust smoothing curve may be gradually limited, and the volatility of some products may be amplified. From a short-term perspective, the scale and performance of these products may experience pains, but from a longer-term perspective, it may help financial management to continuously improve the construction of investment and research capabilities and the control of product risks, so as to achieve more long-term steady development. (Sino-Singapore Jingwei APP)
All rights reserved, may not be reproduced or used in other ways without authorization.
Editor in charge: Song Yafen