Public Funds Not Profitable, Industry Faces Pay Cuts and Layoffs: What Can Be Gained After the Painful Period? (AI Translation)
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By Caixin Weekly's Yue Yue
中国公募基金2023年年报披露完毕，投资亏损的具体数额浮出水面。全部公募基金2023年为持有人创造的收益为-4928.1亿元；其中，权益类基金亏损总额达1.46万亿元，靠债券基金和货币基金盈利的9097.06亿元才缩小整体亏幅。不过，与2022年全部公募基金亏损1.47万亿元相比，2023年已是极力扭亏。
The annual reports for China's public mutual funds for 2023 have been disclosed, revealing specific figures for investment losses. The total returns generated by all public mutual funds in 2023 amounted to a loss of RMB 492.81 billion; within this, equity funds alone accounted for a loss of RMB 1.46 trillion. Profits from bond and money market funds, which totaled RMB 909.706 billion, helped mitigate the overall losses. However, compared to the total loss of RMB 1.47 trillion in 2022 by all public mutual funds, there was a concerted effort to reduce losses in 2023.
尽管2023年末公募基金资产净值合计27.6万亿元，较2022年末的26.03万亿元增加6.03%，但这也是由债券基金和货币基金规模扩张带动，权益类产品无论是份额还是净值都在减少。
Despite the total net asset value of publicly offered funds reaching 27.6 trillion yuan at the end of 2023, up 6.03% from 26.03 trillion yuan at the end of 2022, this increase was driven by the expansion in bond funds and money market funds. Equity products, however, saw a decrease in both shares and net value.
A股市场2023年整体呈冲高回落、震荡下跌走势，行业和主题投资频繁轮动，公募基金赚钱效应持续减弱，权益类产品发行亦降至冰点；叠加下半年启动的公募基金降费让利，主动权益产品占比较高的公司首当其冲。
In 2023, China's A-share market exhibited a pattern of surging and then retreating, with frequent fluctuations and downturns. Sector and thematic investments rotated frequently, while the profitability of public mutual funds continued to weaken. The issuance of equity products also dropped to a record low. Additionally, the reduction in fees for public mutual funds initiated in the second half of the year impacted companies with a high proportion of actively managed equity products most significantly.
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- In 2023, Chinese public mutual funds reported a total loss of 1.46 trillion yuan in equity funds, partially offset by profits from bond and money market funds totaling 909.7 billion yuan, resulting in a net loss of 492.8 billion yuan for fund holders.
- Despite an overall increase in the net asset value of public mutual funds to 27.6 trillion yuan at the end of 2023 (up by 6.03% from 2022), this growth was driven by expansions in bond and money market funds, while equity products saw reductions in both share and net value.
- The Chinese stock market experienced fluctuations throughout 2023 with frequent rotations between sectors and themes, weakening the profitability of public mutual funds, particularly equity products which saw reduced issuance to record lows amid fee reductions initiated in the second half of the year.
In 2023, China's public mutual funds experienced significant financial fluctuations, with total investment losses amounting to RMB 492.81 billion. Equity funds were particularly hard hit, incurring losses of RMB 1.46 trillion, although gains from bond and money market funds totaling RMB 909.706 billion helped offset these losses [para. 1]. Despite a challenging market environment characterized by frequent fluctuations and downturns in the A-share market, the total net asset value of publicly offered funds increased by 6.03% to reach 27.6 trillion yuan at year-end [para. 2].
The industry faced a decline in management fee income, with 99 out of 158 fund managers reporting lower fees compared to the previous year. This reduction was part of broader regulatory efforts to decrease fees across the sector, which began showing positive effects [para. 3]. Additionally, revenue and net profit for leading publicly offered fund companies also declined, reflecting broader financial challenges within the industry [para. 4].
Amid these financial strains, actively managed equity funds showed a shift in investment strategy from large-cap growth stocks towards mid-cap growth stocks. The top five industries invested in by these funds included pharmaceuticals and biotechnology, electronics, food and beverages, electrical equipment, and computers [para. 5]. However, sectors like electronics and pharmaceuticals saw increased holdings due to their cost-effectiveness at historically low valuation levels [para. 6].
Central Huijin Investment Ltd., a significant state-owned investor known as the "national team," continued its strategy of stabilizing the market through ETF purchases. In the second half of 2023 alone, Central Huijin increased its ETF holdings by over 20 billion shares [para. 7]. This move is part of ongoing efforts by Chinese authorities to stabilize capital markets during periods of volatility.
The public mutual fund industry also grappled with internal challenges such as salary cuts and layoffs amid declining revenues. Rumors suggested significant reductions in compensation for fund managers and other key personnel within the industry [para. 8]. These adjustments reflect broader trends across China's financial sector where firms are seeking ways to reduce costs while managing slower economic growth and regulatory changes aimed at stabilizing financial markets.
Overall, China's public mutual fund sector is navigating a complex landscape marked by regulatory reforms aimed at reducing fees and enhancing investor protection while contending with volatile market conditions that challenge profitability and operational stability [para. 9].
- Kweichow Moutai
贵州茅台 - Summary： According to the article, Kweichow Moutai (贵州茅台, ticker: 600519.SH) remains a top holding among active equity funds in China. The stock of Kweichow Moutai has been one of the most highly valued by public mutual funds for two consecutive years, with its holding value exceeding 130 billion yuan by the end of 2023. This indicates that despite the overall challenging market conditions and losses faced by equity-oriented funds in 2023, Kweichow Moutai continues to be favored by fund managers for its investment potential.
- Contemporary Amperex Technology Co., Limited
宁德时代 - Summary： Contemporary Amperex Technology Co., Limited (CATL) is referenced in the article as "宁德时代" (Ningde Times), which is its Chinese name. CATL is a leading global supplier of lithium-ion batteries, specializing in the development, manufacturing, and sales of battery systems for electric vehicles (EVs) and energy storage systems. The company plays a crucial role in the global shift towards renewable energy and electrification of transportation. Based in Ningde, Fujian Province, China, CATL has grown rapidly since its establishment to become one of the largest manufacturers of EV batteries in the world. Its products are used by a wide range of automotive manufacturers around the globe. In the context provided by the article, CATL is mentioned as one of the top holdings among public mutual funds in China, indicating its significant market value and influence within both the Chinese economy and the global battery industry.
- Luzhou Laojiao
泸州老窖 - Summary： Based on the article content, Luzhou Laojiao (000568.SZ) is mentioned as one of the top three stocks held by public mutual funds in China for two consecutive years, alongside Kweichow Moutai (600519.SH) and Contemporary Amperex Technology Co., Limited (CATL) (300750.SZ). This indicates that Luzhou Laojiao, a prominent liquor company in China, has been a significant investment choice for public mutual funds, reflecting its strong market position and investor confidence in its performance.
- Hangzhou Hikvision Digital Technology Co., Ltd.
海康威视 - Summary： Hangzhou Hikvision Digital Technology Co., Ltd., commonly referred to as Hikvision, is a leading company in the security and surveillance industry. It specializes in video surveillance technology, as well as designing and manufacturing a full line of innovative CCTV and video surveillance products. The range of products includes smart IP cameras, HD analog cameras, speed domes, NVRs, DVRs, video management software, alarm systems, encoders, decoders, and other elements of sophisticated security systems and CCTV technology for any security need.Hikvision has grown from a small company into a global enterprise with extensive worldwide reach. Its products are used in various sectors including public security, education, healthcare, financial institutions, and energy sectors. They provide solutions for urban security operations centers (SOC), safe city projects, and intelligent traffic management systems among others.The company is headquartered in Hangzhou, China but operates globally with branch offices around the world. It's listed on the Shenzhen Stock Exchange.In the context of the article content provided earlier about Chinese public mutual funds' performance in 2023 and their investment strategies including style drift issues among some funds; it mentioned that "工银瑞信文体产业股票" (ICBC Credit Suisse Cultural Industry Equity Fund) significantly increased its holdings in industrial and information technology stocks such as Hikvision during 2023. This indicates that despite being initially focused on cultural media industries according to its fund contract, this fund had shifted its investment focus towards other sectors including technology where Hikvision operates.
- 2022：
- China's Securities Regulatory Commission announces its intention to guide fund managers towards adhering to the principles of long-term and value investing.
- 2023：
- Public mutual funds in China report a total loss of RMB 492.81 billion, with equity funds accounting for a loss of RMB 1.46 trillion. Profits from bond and money market funds help mitigate the overall losses.
- 2023：
- Central Huijin Investment Ltd. announces an increase in its ETF holdings, purchasing ETFs worth at least RMB 51.549 billion.
- 2024：
- Central Huijin Investment Ltd. announces its full recognition of the current value of A-share market allocations and its intention to continue increasing ETF holdings.
- 2024：
- Loans from non-banking financial institutions increase by 404.5 billion yuan, marking a record high since the stock market crash in July 2015, potentially related to market rescue efforts.
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