Overseas pension funds overweight Chinese stocks favor stock selection institutions

category:Finance
 Overseas pension funds overweight Chinese stocks favor stock selection institutions


In an exclusive interview with 21st century economic reporter, Fang Yings asset management partner Steven Luk revealed that more than 50 asset management institutions involved in Chinas stock investment participated in the bidding, and it was very difficult for them to win the bid.

The 21st century economic report exclusively learned that bordertocoats selection criteria are not low - in addition to meeting the minimum asset management scale of 500 million pounds, the bidding asset management institutions must also obtain excellent long-term returns by selecting high-quality individual stocks, that is, stock selection (rather than timing) based on fundamental research and long-term investment philosophy. In addition, bordertocoat not only pays attention to whether the ESG investment strategy of the bidding asset management institution conforms to its own investment philosophy, but also emphasizes that the lower the turnover rate of the bidding asset management institution, the better.

This is also in line with the current investment style of most global pension funds, that is, they do not like to profit from market fluctuations, but prefer to allocate stocks with growth potential in the long term, so as to share the fruits of sustainable economic development. A person in charge of an asset management institution familiar with the investment style of pension funds pointed out to the reporter.

Although it is rumored that bordertocoat will invest 300-500 million pounds in initial capital into the two bid winning asset management institutions, the final investment amount of the British pension fund has not yet been determined in actual operation. It is generally believed by the industry that, firstly, the weight of Chinese stocks in the MSCI Emerging market index continues to increase, so bordertocoat is still discussing whether to increase the allocation of Chinese stocks in advance; secondly, the asset allocation team of bordertocoat also needs to calculate whether the expected risk adjusted return of the whole portfolio can meet the pension fund once the allocation of Chinese stocks is increased Excellent long-term return requirements.

The person in charge of the above-mentioned asset management institutions pointed out that behind this, more and more pension funds in Europe and the United States are allocating Chinese stocks as an independent asset class, which indicates that Chinas stock is becoming increasingly attractive to global pension funds.

Selection threshold of bordertocoat

Bordertocoasts bidding and selection of entrusted investment institutions for Chinas stock assets (including a shares, Hong Kong shares and China capital stocks) began with the major adjustment of its internal business.

After consulting with 12 major investors, bordertocoat decided to create two separate portfolios in the Emerging Markets Equity Fund: one is based on Chinese stocks; the other is focusing on the stocks of other emerging market countries; the other is to increase the total investment of emerging market equity fund to 800-900 million pounds.

In fact, the selection threshold for bordertocoat is not low. He stressed. In the process of due diligence, bordertocoat investment management team not only has an in-depth understanding of the Chinese stock investment strategy, investment decision-making scientificity and operation standardization, ESG investment strategy, stock selection method and past performance return of each bidding institution, but also pays special attention to the synergy between bidding asset management organization and its own investment strategy, whether it can be acquired through high-quality stock selection and long-term holding ability Excellent long-term returns.

The reporter learned from many sources that although many bidding asset management institutions claim that they have outstanding stock selection ability and adhere to the long-term investment concept, through due diligence, bordertocoat found that many bidding institutions did not meet their stock selection requirements and long-term investment philosophy based on fundamental research, and quickly removed them from the selection category.

Steven Luk said that in order to ensure the unity of words and deeds of the bidding asset management institutions, the bordertocoat investment management team needs to make full use of all departments of Fangying asset management, communicate in-depth with department heads, traders, etc., to understand whether the implementation of each investment operation is consistent with the information provided.

The person in charge of the asset management institution, who is familiar with the investment style of pension funds, admitted to reporters that not all global pension funds are quite disgusted by the high volatility of net worth. In fact, they are well aware of the dual characteristics of high volatility and high return in emerging market stock markets. Therefore, in general, these pension funds incorporate Chinas stock portfolio into a large asset allocation category, and control the risk of high volatility by purchasing other types of assets and adjusting the proportion of allocation.

In Steven Luks view, bordertocoats selection of Chinas entrusted investors is also very focused on whether the latter can bring excellent long-term returns. Specifically, bordertocoat requires that the annualized average return of the Chinese equity portfolio of the bidding asset management institutions outperform the FTSE total China connect index by at least 3 percentage points over the next five years. Of course, it also means that bordertocoat will remain tolerant if the volatility of Chinas investment portfolio rises in one or two years due to severe market volatility.

In addition, bordertocoat also attaches great importance to whether the bid winning asset management institution can achieve unity of words and deeds in the investment management stage. Once bordertocoats investment funds are in place, Fangying asset management should submit relevant Chinese stock trading data (including turnover rate) every month to prove that its investment return comes from stock selection rather than timing.

In the past, most global pension funds have allocated Chinese stocks into emerging market sub funds or global funds. A Global Pension Fund Asia Pacific business director told reporters. With the increasing weight of Chinese stocks in MSCI Emerging Market Index in recent years, they have allocated Chinese stocks as a single asset class, which means that the total amount of Chinese stocks allocated by global pension funds continues to increase. In addition, in the past, global pension funds mainly follow the weight of MSCI Emerging Market Index to passively invest in A-shares. However, after Chinas economy took the lead in shaking off the epidemic and achieving a stable rebound, many pension funds increased the proportion of investment in active stock selection allocation to achieve more substantial long-term returns.

The reporter has learned from many sources that the pension funds that passively invest in a shares following the weight of MSCI Emerging market index have gradually increased the proportion of Chinese stocks in emerging market funds to 1 / 3, and increase the proportion of pension funds with active stock selection investment to about 50%.

In addition to the large global pension funds with an asset management scale of more than 100 billion US dollars, which have the ability to deploy a dedicated Chinese asset investment management team, many smaller pension funds tend to entrust investment mode. The head of Global Pension Fund Asia Pacific said. But in the aspect of entrusted investment, most pension funds are faced with many problems. For example, at present, many pension funds believe that the return on Chinese stock portfolio investment mainly comes from timing or beta (profit following the rise of stock index), and the real alpha return (excessive return obtained through active stock selection) is not high. Therefore, they are not willing to pay management fees based on alpha, which makes the entrusted investors dissatisfied. In addition, cultural differences will also lead to this To Europe and the United States pension funds and Chinas private funds in the communication is easy to have differences and contradictions. In his view, there is a big difference between pension funds and family offices in the selection of entrusted investors of Chinese stocks. Compared with the latter, they pay more attention to the performance of the entrusted investors (tolerating excessive returns through timing investment), while the former attaches more importance to the risk control ability of Chinese stock portfolio and the robustness of medium and long-term returns. Steven Luk believes that this requires in-depth communication between the entrusted investor and the pension fund in advance, and many contradictions and differences can be solved only if both sides recognize each others investment ideas and trading strategies. Source: Ren Hui, editor in charge of economic report in the 21st century_ NBJ9607

In addition to the large global pension funds with an asset management scale of more than 100 billion US dollars, which have the ability to deploy a dedicated Chinese asset investment management team, many smaller pension funds tend to entrust investment mode. The head of Global Pension Fund Asia Pacific said. But in the aspect of entrusted investment, most pension funds are faced with many problems. For example, at present, many pension funds believe that the return on Chinese stock portfolio investment mainly comes from timing or beta (profit following the rise of stock index), and the real alpha return (excessive return obtained through active stock selection) is not high. Therefore, they are not willing to pay management fees based on alpha, which makes the entrusted investors dissatisfied. In addition, cultural differences will also lead to this To Europe and the United States pension funds and Chinas private funds in the communication is easy to have differences and contradictions.

In his view, there is a big difference between pension funds and family offices in the selection of entrusted investors of Chinese stocks. Compared with the latter, they pay more attention to the performance of the entrusted investors (tolerating excessive returns through timing investment), while the former attaches more importance to the risk control ability of Chinese stock portfolio and the robustness of medium and long-term returns.