21 Depth 丨 "Personal Department" Public Fund Big Bottom: Can the Big Guy "Entrepreneurship" Be Dressed at Night?

21st Century Business Herald reporter Wang Yuanyuan reported from Shanghai

In 2021, the public offering industry is changing.

Since the Spring Festival, the market has interpreted the structural market to the extreme, the major rankings have changed frequently, and the performance of some star funds has been greatly adjusted, and even the performance of the market index in the same period has not been able to run.

At the same time, the scale of public funds continues to grow, once breaking the record for 5 consecutive months, and once exceeded 24 trillion yuan.

According to the data on the website of the Asset Management Association of China, as of October 26, 2021, there were 151 co-owned fund management companies in China, and the net asset value of public funds under management totaled 23.90 trillion yuan.

Opportunities and challenges coexist, and the choices of some bigwigs in the industry have also diverged.

<h4>Big Guy Entrepreneurship: Public Offering or Private Placement? </h4>

Xingquan Fund officially announced that Dong Chengfei was not the fund manager, and the Xingquan Trend Fund managed by it hired Xie Zhiyu and Dong Li as fund managers, and co-managed with the original fund manager Tong Lan; Xingxin Vision Fund was taken over by housewarming.

Dong Chengfei is known for his steady investment style and is known as "Guo Jing in the fund industry". According to public data, Dong Chengfei has been in the industry for 18 years, served as a fund manager for nearly 15 years, and won 24 fund awards during his tenure.

For his "next stop", the mainstream speculation in the market is "running privately".

The so-called "private", that is, to defect to the private equity industry.

At the same time, there are also public fundraising bigwigs who are eager to fight in the public fundraising jianghu in the form of "entrepreneurship".

At the end of September, the application for the establishment of the "individual" public fund company Quanguo Fund received feedback from the CSRC. Among them, Wang Guobin, former chairman of Dongfanghong Asset Management (now "Orient Securities Asset Management"), and Ren Li, former general manager of Orient Securities Asset Management, two influential figures in the asset management industry, appeared in the list of shareholders, causing market concern.

This is actually a process of Wang Guobin's public to private and then back to the public.

In 2016, Wang Guobin left the position of chairman of DongfangHong Asset Management and founded the private equity investment fund Junhe Capital. Today, 5 years later, he cooperated with Ren Li, who left the post of general manager of Orient Securities Asset Management, to establish Quanguo Fund.

Wang Guobin is not alone.

Following the private placement, the "personal department" public offering has become a new position for the star-level bigwig to "start again" after leaving the old owner.

For example, Chen Guangming and Fu Pengbo of Ruiyuan Fund can be called the benchmark figures of domestic value investment; Fan Yonghong of Pengyang Fund, who single-handedly founded Huaxia Fund, has always had the reputation of "godfather of the industry" in the industry.

In fact, since 2015, the individual department public offering has been approved to establish 23 companies. However, the same are the "big guys" in the industry out of the re-entrepreneurship, the development of these public offerings is more differentiated. Looking at the scale of management alone, the scale of some management has reached 100 billion, and the scale of management of some people is less than 100 million.

In this report, we will focus on the "individual department" public offering, and try to explore the common characteristics that cause the "individual system" public offering differentiation pattern in the comparison with the development law of private placement.

<h4>The similarities between "individual" public offering and private placement</h4>

<h4>First, take the founder as the core of development</h4>

Although the "individual" public offering is a public offering platform, like private equity funds, its development model and characteristics are closely related to the professional experience of the core founders.

Even some funds themselves, such as Pengyang Fund, Capstone Fund, Bodao Fund, these three fund companies, the predecessor of the private equity fund, therefore, also with the characteristics of private equity funds with the founder as the core of development.

A distinctive feature is that the bond management scale of the founders of the insurance/banking system is relatively large, and the stock management of the founders of the public offering department is relatively large.

Among the 23 core founders of individual public offerings, 2 founders have insurance backgrounds and 2 founders have banking backgrounds, which brings them a large bond fund management scale.

Because insurance and banks have always invested a large amount of money, invested more in bond-based products in the traditional sense, and some of these founders are also from the investment director of the fixed income department, so their personal experience of investing in bonds has also been brought to the public funds founded.

This is similar to entrepreneurial private placement.

For example, Wang Dexiao, the founder of Hongde Fund, has many years of experience in the insurance industry, so Hongde Fund accounts for a certain proportion of bond funds in the management fund. As of October 26, the non-monetary fund size of Hongde Fund was 117.098 billion yuan, of which the bond fund size was 21.709 billion yuan.

Yang Aibin, the general manager of Pengyang Fund, worked as a loan officer at Shanghai Pudong Development Bank, then served as a bond researcher and deputy general manager of the portfolio management department of Ping An Insurance, and later joined Huaxia Fund as a fixed income director. As of October 26, the size of non-monetary funds managed by Pengyang Fund was 85.856 billion, of which the size of bond funds was 45.403 billion.

The most obvious of this trait is actually the Hive Fund. Founder Tang Huang was the general manager of the financial market department of Guangfa Bank, the founder Chen Shiyong has worked in Xiamen International Bank and Industrial Bank, and when he was in Industrial Bank, he once served as vice president of financial market headquarters, general manager of capital operation center and general manager of interbank business department. This resulted in the entire managed size of the Hive Fund being 28.158 billion yuan, but 28.141 billion yuan was a bond fund.

Xu Dai, one of the founders of Minya Fund, also worked at China CITIC Bank. However, the company's total management scale is only 52 million yuan, and it is currently a hybrid fund product.

Chen Guangming, who is well known for investing in stocks, founded the Ruiyuan Fund, needless to say, its total management scale is 53.732 billion, all of which are hybrid funds.

<h4>Second, after the bull market, "entrepreneurship" funds have more opportunities</h4>

At present, of all 23 individual public offerings in the market, the time for their approval to exhibit is concentrated in 2018, and a total of 8 individuals have obtained regulatory approval in this year and can start their public offering business. (As the approval date is generally earlier than the fund establishment date, the approval date is used as an indicator)

In February 2015, Hongde Fund won the first approval as an individual public offering. From 2015 to 2021, the number of approved individual department public offerings each year is: 1, 2, 5, 8, 1, 5 and 1.

The time of the establishment of these public funds follows the entrepreneurial law of private funds - after a bull market, many public fund managers run to private placements with impressive performance to attract investors and raise funds.

The actual results of the operation also more or less prove the effectiveness of this strategy.

Among the above 23 "individual departments" public offerings, a total of 11 institutions have a management scale of more than 10 billion.

Among the individual public offerings with a scale of more than 10 billion, only one Hongde fund was established in 2015 (Zhonggeng Fund is calculated by the time of approval), 2 funds were established in 2016, 3 funds were established in 2017, and 5 funds were established in 2018.

Although the market performance in 2018 was not good, after the big fall in 2015, from the beginning of 2016 to 2017, the market had a period of upward movement, and some fund managers took advantage of this wave of market to obtain good returns, which will become their personal marketing story.

<h4>Third, whether the investment research team holds a controlling stake may affect the stability of the institution</h4>

Another of our findings is that in funds larger than 10 billion, the general manager and major shareholder of the company tend to be the same person; in smaller companies, the general manager and the major shareholder are more likely to be not the same person and belong to the "partnership".

Because in the entrepreneurial private equity and public offering, the core investment research figures often play one of the above roles (general manager or major shareholder), not all of them control the startup company, so we are very concerned about - whether the investment research team controls - the investment research team controls the entrepreneurial public offering/private placement, and its team development seems to be more stable, and it is easier to make the management scale larger and achieve greater development.

For example, Ruiyuan Fund, the general manager and major shareholder are Chen Guangming, is a typical investment research team holding; in the Bodao Fund, Mo Taishan, who has investment and research experience, is the major shareholder, and Shen Bin, who has market sales experience, is the general manager, which is a typical investment research holding partnership venture fund; in the Hengyue Fund, Huang Xiaojian, who has investment research experience, is the general manager, and Li Shujun, who has been a CFO in continuous entrepreneurship and has served as a CFO in an entertainment company, is the major shareholder, which is a typical investment research partnership venture fund.

Although there are only 23 individual public offerings in the market at present, and there are few sample cases, the above findings are consistent with the views of some people in the industry who study private equity funds.

The person in charge of the introduction of private equity products of securities companies said: "Under normal circumstances, there will be certain risks if the core figures of investment research do not hold shares. Because in a private equity fund, the funds are all looking for the investment and research capabilities of the core investment manager to buy its products, so the stability of the core investment manager is very important for a private placement. If the scale of the private equity fund becomes larger, but the core investment manager does not have a controlling stake, it may have a feeling of uneven distribution of benefits in the future, and finally affect the stability of the institution. The person in charge said that the recent incident of Narushi investment is a very typical case.

In the individual public offering, the negative impact of this situation will be weakened, because some of the founders of the public offering do not even have investment research experience, and the core founder is the marketing/sales background.

However, in the early stage of entrepreneurship, to make a name for itself in the market, an excellent investment research team is still the best selling point. Founders with a marketing background still need to bring in an investment research team or fund manager with a certain degree of visibility, and may give the latter enough voice.

Such an approach is not completely worry-free. Unlike mature large companies, the core figures and main directions of mature large companies are often clear, but the founders of startups are often prone to conflict at a certain stage of development, and even the founders and the investment research team that gives enough voice may also clash.

For example, Wu Chuanyan, the star fund manager of Hongde Fund, joined the company since the beginning of the establishment of Hongde Fund in 2015, and after recently "being" co-managed a fund, he dared to harden the company, which once plunged the company into negative public opinion.

<h4>The difference between "individual" public offering and private placement</h4>

<h4>First, the direction of the person in charge of public offering marketing to the sea</h4>

Among all the individual public offering founders, we found an interesting phenomenon - many founders have previously worked as sales/marketing/marketing directors in large fund companies.

Among the 23 individual public offerings, 10 of the core founders of the public offerings come from well-known public offerings marketing/sales positions, accounting for half of the number of founders from all public offerings.

Some of these 10 companies are founding team combinations of investment research + marketing/sales, and some are founders of pure marketing/sales.

This is a significant difference between individual public and private funds.

Generally speaking, the core founders of private equity funds must have very strong investment capabilities, because private equity funds cannot do marketing to all market investors without distinction, and their usual minimum purchase threshold of 1 million yuan determines that the source of funds of private equity funds is high-net-worth customers with strong connections or stickiness.

High-net-worth clients with millions of investable funds often value the investment ability of private equity managers/the ability to obtain excess returns, focusing on the investment manager itself, which is a stronger sticky trust.

However, this is not the case for public funds, which are facing a wider range of investors in the market who may not have investment experience and basic knowledge, so marketing and sales are very important in the large-scale development of public funds. Although the marketing strategies of public funds in recent years are often intended to create star fund managers and strengthen the trust between individual investors and fund managers, this is still a large-scale marketing method.

This explains why there are so many marketing/sales leaders among individual public offering entrepreneurs – for them, marketing experience in public offerings can also be brought to the public offering.

At present, these marketing/sales backgrounds of individuals in the public offering, do better are: Huian Fund, Zhonggeng Fund, Huisheng Fund, Chunhou Fund, Bodao Fund 5 companies, their fund management scale has reached more than 10 billion, respectively: 39.019 billion, 24.923 billion, 24.820 billion, 23.223 billion, 19.622 billion.

Among all the individual public offerings, there are only 11 funds with a scale of more than 10 billion, and there are 5 funds with marketing/sales background founders, accounting for half of the country, which can almost be regarded as very successful.

The above five companies were established in April 2016, November 2015, September 2018, November 2018 and June 2017.

Such achievements are undoubtedly the envy of private equity entrepreneurs - the longest is only 5 years, the shortest is only 3 years, and these "startups" have ranked among the tens of billions.

This may be inseparable from their entrepreneurial time, after 2015, coinciding with the serious setback in the investment confidence of investors and basic people. Subsequently, 2016-2017 has experienced two years of recovery, and the entire market in 2018 is a pessimistic voice - in the context of the sharp drawdown of most fund products, marketing/sales may have played a greater role in stabilizing customers.

In addition, in the above 5 tens of billions of individual public offerings, in addition to the core founding team of Bodao Fund is a combination of "investment research + sales" - the company's general manager Shen Bin has served as the sales director of BOCOM Schroders and the director of Chongyang investment market, and the company's major shareholder Mo Taishan was the general manager of BOCOM Schroders, the president of Chongyang Investment, and won 4 "Golden Bull Award" honors - the founders of the other 4 public offerings are pure marketing/sales background.

For example, He Bin, the majority shareholder of Huian Fund, was once the deputy general manager of Jianxin Fund, in charge of marketing, back-office operations and product innovation, while General Manager Liu Qiang had previously served as the CFO of Honeywell and Artvis (China), with almost no financial institution background.

Zhang Jinfeng of Huisheng Fund, who previously served as the executive director and administrative head of the Internet finance department in Huaxia Fund; Xing Yuan, of Chunhou Fund, served as the deputy director and director of channel/marketing departments in Huatai Berry Fund and Caitong Fund; Meng Hui of Zhonggeng Fund, who previously served as regional sales director and deputy sales director of Minsheng Securities and Guojin Securities, and later served as deputy general manager of Haifutong.

<h4>Second, the chairman and general manager of the concentrated entrepreneurial direction</h4>

Another significant feature of the existing individual public offering is that the core founders are almost all in fund companies, securities companies, asset management companies, banks, insurance and other institutions, working in senior positions such as chairman, general manager, assistant general manager and so on.

For example, the Quanguo Fund, which has attracted market attention this time, the most concerned among the founding shareholders are Wang Guobin, former chairman of Dongfanghong Asset Management (now "Orient Securities Asset Management"), and Ren Li, former general manager of Orient Securities Asset Management.

Of the 23 individuals in our statistics, a total of 14 founders have previously held senior management positions in well-known companies.

This is also a significant difference from private equity funds.

Because the customers of private equity funds are more "looking at people", the investment and research ability of core founders is very important, so many well-known private equity founders in the market have previously been star fund managers. These fund managers did not necessarily hold administrative positions in the previous company, as long as the performance was good enough and stable enough, there was enough appeal in the market to raise funds, so it was easy to start a business.

However, the individual public offering is still like the traditional public offering, which requires the blessing of marketing, so the founder's management ability, resource appeal, and even the ability to introduce large funds such as insurance are very important. This may be the reason why the chairman and general manager are keen to devote themselves to starting a business here.

<h4>The status quo of "personal department" public offering products</h4>

At present, there are 23 "individual" public funds in the whole market, a total of 269 private equity products and 264 public offering products have been issued, and the corresponding investment managers under management are 74 and 99 respectively. In fact, the management scale of fund companies in our aforementioned statistics is calculated by the public offering products it manages. Since the information of private placement products is not public, we are not yet able to count the management scale of all private placement products.

<h4>First, the quality of entrepreneurial public offerings is uneven: fund managers may "cross-bank" management</h4>

Among the 23 individual public offerings we counted, except for 11 institutions with a management scale of more than 10 billion yuan, and Shangzheng, Yimi, and Xinghe, which have not yet issued public offering products, the remaining management scale is mostly below 2 billion.

It is not difficult to understand such a situation. The founders of most institutions do have a good reputation in the industry, but entrepreneurship is all about starting over. In the same stage competition with the traditional institutional public offering, it is still very difficult to win the reputation and market recognition of the majority of basic people.

In addition, the "individual" public offering has always been a platform-type company, in which the fund managers have greater differences in investment capabilities, which are also more differentiated in terms of specific product performance.

For example, the Oriental Alpha Fund, with its highest annualized return, Oriental Alpha Advantage Industry A, had an annualized return of 99.20% as of October 27, but its oriental alpha Zhaoyang C, which had the lowest annualized return, had an annualized return of -12.83% as of October 27.

Hengyue Fund also has a situation where the performance of its products is more differentiated, and it is even more "outrageous".

As of October 27, Hengyue Advantage Select, which has the highest annualized return, has an annualized return of 77.54%, while Hengyue Quality Life, which has the lowest annualized return, has an annualized return of -48.41%.

The fund managers of the above two funds are Ye Jia.

Prior to joining Hengyue Fund, Ye Jia worked in Yinhua Fund, Shenwan Hongyuan Securities Asset Management Department and East Asia Qianhai Securities Asset Management Department, and her past experience was mainly in investing in bonds. But when I arrived at Hengyue Fund, I served as a fund manager for a number of hybrid funds and began to manage stocks! It's no wonder the annualized return gap between the two hybrid funds it manages is so large!

The probability of such a situation in the traditional established public funds in the market is extremely low.

But even in the case of fund managers with such bond experience managing stocks, Hengyue Fund, which was established in 2017, has now managed more than 10 billion non-monetary funds.

This shows that for investors, investing in "personal" public offerings, it is still necessary to maintain sufficient vigilance and identification ability.

The newly created public fund will inevitably be weaker than the existing public fund in terms of team personnel. In the public offering, a complete investment research team, a middle and back office team can allow them to allocate enough manpower in specific businesses, while "startups" are likely to have a situation where one person "wears multiple jobs".

In addition, the former investment masters, after the establishment of the public offering, their product performance may not necessarily repeat their past glory.

At present, the largest number of public offerings are issued by Pengyang Fund, with a total of 53 public offerings (A/C shares are not calculated separately), with a total scale of 86.562 billion.

From the perspective of categories, bond funds accounted for half of the country with a scale of 45.403 billion, while equity funds were only 4.135 billion yuan and hybrid funds were 36.318 billion yuan.

In terms of performance, among the 22 bond-based products that have been issued, the top performer is Pengyang Huili A/C, with a total asset size of 6.6 billion yuan, and the current fund managers are Yang Aibin and Jiao Cui. Pengyang Huili A has yielded 4.14% this year (as of October 26).

The above performance is not impressive. After all, the average yield of hybrid bond secondary funds has been 5.25% so far this year.

<h4>Second, the new model: hanging the "head" of public offering, selling the "meat" of private placement</h4>

Among these funds, the one that issued the most public offerings was Pengyang Fund, with a total of 53 public offerings, and the largest number of private offerings was Ruiyuan Fund, with a total of 124 private offerings.

We found that the private placement business of some public funds may be better than the public offering business, and it seems to adopt a model of public marketing and actually developing private equity business.

For example, Ruiyuan Fund currently has only 2 public offering products and 4 fund managers in charge; but there are 124 private account products, and 10 fund managers are assigned to manage.

Pengyang Fund issued 53 public offering products with 16 fund managers in charge; 67 private equity products were issued, with 16 fund managers in charge;

In addition, huiquan fund, BaiJia fund, da fund and other three fund companies also have such a situation - that is, there are more private products than public offerings, and there are more fund managers who manage private placements than or equal fund managers who manage public offerings.

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