E Fund Fan Yue, Speak Out!

China Fund News reporter Fang Li

On April 23, China Fund News held the 20th Anniversary ETF Forum of China's Fund Industry in Shenzhen with the theme of "ETF Era and New Wave of Investment".

As a leader in the fund industry, E Fund has been deeply involved in the ETF business for many years, and Fan Yue, Vice President of the company, attended the event and delivered a keynote speech on "ETF Serving the High-quality Development of the Capital Market".

Fan Yue mainly shared his experience in the development of ETFs in overseas markets and his thoughts on ETF development. He believes that the vigorous development of the ETF market is inseparable from the innovation and iteration of the product side and the business side. Drawing on the development experience of overseas markets, from the perspective of products, core broad-based ETFs have broad development space in the future, and from the perspective of business, the high-quality development of ETFs is inseparable from the deep integration with investment advisors. In the era of wealth management, brokerage investment advisors will gradually transform and pay more attention to providing equity asset allocation services such as ETFs.

In his speech, Fan Yue emphasized that the new "National Nine Articles" proposed to vigorously promote the entry of medium and long-term funds into the market and promote the development of indexed investment, which will help increase the proportion of equity funds and continue to expand the long-term investment force. At the same time, with the implementation of the new "National Nine Measures" and other effective measures, the gradual maturity of the index ecosystem, the improvement of market effectiveness and the acceleration of product innovation, the mainland index market is expected to usher in an era of golden development, and the long-term market space is promising.

The global ETF market is booming

Fan Yue first introduced the development of global ETFs. He said that the global ETF market is in a booming period. As of the end of the first quarter of this year, the scale of global equity ETFs exceeded 9.5 trillion US dollars, and the net inflow of funds in the past year exceeded 600 billion US dollars. The scale of equity ETFs on the Shanghai and Shenzhen stock exchanges in China exceeded 2 trillion yuan, with an inflow of nearly 900 billion yuan in the past year, ushering in a big year of development. Compared with overseas mature markets, the domestic ETF market has a large market space and a faster rate of capital inflow.

Fan Yue said that the vigorous development of the ETF market is inseparable from the innovation and iteration of the product side and the business side.

On the product side, the trend of overseas product innovation has important reference significance. Among them, some potential varieties that adapt to the domestic market environment are worthy of our attention, such as active ETFs, strategy ETFs, multi-asset ETFs, covered ETFs, etc. These varieties are still in the blank or early stage of development in China, but the asset allocation attributes and customer demand are strong as a whole, and if they can be introduced into the market in the future, they will play a certain positive role in the high-quality development of the capital market.

In the overseas market, active ETFs and strategic ETFs have grown rapidly in recent years, which is also an important innovation direction in China in the future. The advent and development of active ETFs is one of the most important innovative trends in overseas ETF products in recent years, and it is showing an accelerated development trend. Among them, the transformation of OTC active funds into active ETFs has an obvious trend, and top managers such as Fidelity and JPMorgan are actively participating in the transformation layout.

In 2023, the scale of active ETFs in the United States will reach $530 billion, and 76% of the new ETFs are active ETFs. The proportion of strategic ETFs in new US ETFs has risen to nearly 20%. These abundant ETF types provide important experience for the differentiated development of domestic products.

On the business side, from the experience of other major mature markets, the proportion of investment advisors investing in ETFs has increased significantly in the past decade. Taking the United States as an example, at present, 41% of the assets of fee-based investment advisors are allocated to ETFs, mainly because of their long investment period and large asset allocation, while ETFs have low fees and can be used as a better underlying tool for asset allocation. Robo-advisors are an important tool to solve the allocation needs of long-tail customers, and 100% of their underlying assets are based on ETF products. The expansion of its application in investment advisory scenarios is an important reason for the rapid development of the ETF market in the United States.

Providing a comprehensive solution system through model portfolio is also a valuable reference for overseas development experience. Model portfolio is an important part of the solution system of overseas investment advisors. As of mid-2023, the size of the U.S. tracking model portfolio reached $424 billion, an increase of 21% over the same period of the previous year, and the top 10 model portfolio providers have also achieved rapid growth in the past two years.

In addition to the ETF trends mentioned above in North America, dividend strategies have gained traction in Asia in recent years. Especially in regional markets such as Taiwan, Japan, and South Korea, the dividend strategy has developed particularly rapidly. In the future, under the combined effect of factors such as economic transformation and development, market interest rate decline, and other factors, mainland dividend strategy-related ETFs are expected to enter a new stage of development.

Strengthen long-term investment strength, product and demand at both ends

Fan Yue said that from the perspective of industry development, the new "National Nine Articles" proposes to vigorously promote the entry of medium and long-term funds into the market and promote the development of indexed investment, which will help increase the proportion of equity funds and continue to expand long-term investment strength.

First of all, ETFs are favored by all kinds of investors due to their high transparency and low fees, and have become an important tool for medium and long-term capital entry into the market. At present, the scale of equity ETFs held by domestic institutions has reached 784 billion yuan, accounting for 44% of the total market. According to the report of the Shanghai Stock Exchange, various institutional investors have entered the ETF market rapidly in the past few years, and the ETF holdings of insurance and other institutions have increased significantly.

Secondly, the proportion of contrarian investment in ETF investment is relatively high, which is conducive to enhancing market stability. From the perspective of historical data, the net value added of ETF shares shows a certain inverse relationship with the overall rise and fall of the market. In the process of market correction since the beginning of 2020, 2022 and the second half of 2023, the share of ETFs, especially broad-based ETFs, has increased significantly, which can play the role of market "stabilizer" to a certain extent.

From the perspective of the product side, the core wide base may become an important direction for the future development of the product side. At present, the proportion of broad-based ETFs in overseas mature markets is generally high, accounting for more than 80% in the ETF markets in Japan and Hong Kong, China, while the proportion of broad-based ETFs in mainland China is currently only about 50%, and there is great room for improvement in the future. At the same time, core broad-based products also play a positive role in attracting medium and long-term funds into the market and promoting the healthy and stable development of the market.

From the business side, the high-quality development of the ETF market is inseparable from the deep integration with the investment advisory business. Brokerage investment advisors have rich experience in serving stock customers on the floor, and are expected to expand to provide investors with allocation services for assets with rights such as ETFs as they enter the era of wealth management.

Domestic ETFs ushered in a golden age of development

Looking to the future, Fan Yue bluntly said that the current domestic ETF scale has exceeded 2 trillion yuan, with the implementation of the new "National Nine Measures" and other policies, the gradual maturity of the index ecosystem, the improvement of market effectiveness and the acceleration of product innovation, the mainland index market is expected to usher in the era of golden development, and the long-term market space can be expected.

According to the data, it took 17 years for the US ETF market to reach a total size of US$1 trillion from the launch of the first product, and it also took 17 years for the Chinese ETF market to start in 2004 and reach a total market size of 1 trillion yuan in 2021. In the United States, the ETF market doubled from $2 trillion to $4 trillion from 2010 to 2014, while China doubled in just two years. Since 2015, the size of the US ETF market has risen rapidly from $2 trillion to $8 trillion now, and we are very much looking forward to a golden age for Chinese ETFs in the next 10 years.

In order to better meet the development opportunities of the ETF era, Fan Yue also shared some of E Fund's explorations and experiences in the ETF business.

After 20 years of product layout, E Fund has formed a product map covering broad bases, industry themes, styles, cross-borders, and commodities. The company continues to deploy various innovative index products, and has launched many of the first and first ETF products in the whole market to meet diversified investment needs. At present, E Fund manages a total of 145 public index funds, making it one of the fund companies with the largest number of products.

Secondly, in order to improve the customer experience, the company has built a set of solution systems. With in-depth research as the underlying driving force, this solution system covers quarterly, monthly and weekly standardized content outputs, providing a full range of services such as investment research, investment education, and investment consulting, and reaching different types of customers through multiple channels.

In the future, E Fund's ETF business will continue to iterate and improve in terms of product layout, solutions, and portfolio management, and actively serve the high-quality development of the capital market.

Editor: Joey

Review: Xu Wen