How to Save Public Funds After Bleak First-Half Performance? (AI Translation)

【周刊提前读】上半年业绩仍然惨淡 拿什么挽救公募基金？

In 2024, after rebounding in February, the A-share market witnessed range-bound fluctuations. The Shanghai Composite Index closed at 2,967.40 points on the last trading day of the first half of the year, just managing to stay above the 3,000-point mark. The semi-annual performance reports of public funds revealed mixed results. By June 28, the Shanghai Composite Index had fallen by 0.25%, the Shenzhen Component Index by 7.10%, and the ChiNext Index by 10.99%. Only the SSE 50 and CSI 300 among the broad-based indices posted positive returns, rising by 2.95% and 0.89%, respectively. Larger stocks outperformed smaller ones, with sectors like banking, coal, utilities, and telecommunications showing high returns [para. 1][para. 9].

There was a notable increase in investors' demand for safe-haven assets, given the declining interest rate environment. Bond funds and dividend-themed equity funds became the preferred investment choices due to their higher certainty. The low-volatility dividend index rose by 10.84% over six months, and the China Treasury Bond and China Credit Bond Indices increased by 4.44% and 3.27%, respectively. Meanwhile, public mutual funds faced significant revenue challenges despite a year into fee reduction measures. Management fees for these funds dropped by 7.56% year-on-year in 2023 [para. 2][para. 3].

The top 20 fund companies controlled over 55.77% of non-monetary fund assets and dominated 74.95% of the index business, making it difficult for smaller companies to catch up. On July 1, new rules for securities trading fees for publicly offered funds came into force, reducing trading commissions and bringing fee rates for non-passive equity funds down to 0.05%. This reform also aimed to eliminate practices where transaction commissions were used for marketing expenses rather than research services, benefitting fund holders [para. 4][para. 5].

By mid-2024, the Shanghai Composite Index had declined by 0.25%, with the other major indices suffering larger losses. Equity funds showed weak performance, while bond funds saw a surge in both issuance and performance, with over 96.48% posting positive returns. Dividend-themed funds and QDII funds targeting overseas markets also performed well, with QDII funds yielding an average return of 6.61%. Notably, Manulife's Prosperity Navigator, invested in AI concept stocks, achieved a half-year return of 30.19% [para. 6][para. 7][para. 8].

The bond market continued its bullish trend, driven by declining yields on 10-year and 30-year government bonds, which hit record lows. Institutional investors aggressively entered the bond market, fueling product performance. High-profile bond issuances saw significant investments, reflecting the domestic asset shortage and declining interest rates. High-dividend strategies also gained traction among equity products, reflecting a growing preference for stability [para. 9][para. 10].

The total net asset value of public mutual funds reached a record high of 31.24 trillion yuan as of May 2024. The issuance of bond funds dominated the market, accounting for 81.07% of total new issuances in 2024. Changes in regulatory practices, such as the halting of banks' "manual interest subsidies," led to a significant migration of capital into mutual funds. Dividend-themed strategies continued to perform well, emphasizing value investments [para. 11][para. 12][para. 13].

The industry faced regulatory scrutiny, particularly regarding business regulation, compliance risk control, and integrity construction. The reduction in transaction commissions and trading seats aimed to ensure greater transparency and fairness, with strict limits on the use of commissions for third-party services [para. 14][para. 15][para. 16][para. 17].

The reform is expected to bring qualitative changes to the industry, reflecting a shift toward more transparent fund management practices. The industry must adapt to new requirements, including disclosure of commission rates and compliance with reduced transaction costs [para. 18][para. 19][para. 20].