China Fund News reporter Li Shuchao Fang Li
Another major innovative product has been officially approved!
htmlOn September 23, Fund Jun learned from many channel personnel that the first batch of FOF-LOF products were approved, and five public offerings including GF, China-Europe , Xingzheng Global, Bank of Communications Schroder , and Minsheng Jiayin Fund took the lead.The above funds all applied for application materials on August 5 this year and were accepted on August 12, with the official approval date on September 16. People from many fund companies officially obtained product approval documents today, and another innovative fund variety was officially approved for issuance.
Industry insiders said that FOF-LOF, as an innovative category of FOF products, can be traded on the market. Since most FOF products currently have the shortest holding period requirements, FOF-LOF provides liquidity for FOF product holders in the closed period, and also helps to enhance the attractiveness of FOF products and make more people pay attention to the FOF category.
The first batch of FOF-LOF products were approved
5 public offerings took the lead
Public information shows that the first batch of approved products are GF Preferred Allocation Two-year Closed Operation Mixed Fund (FOF-LOF), Bank of Communications Schroeder Intelligent Select Starlight One-year Closed Operation Mixed Fund (FOF-LOF), Minsheng Jiayin Youxiang Balanced 6-month Regular Open Mixed Fund (FOF-LOF), Xingzheng Global Active Allocation Three-year Closed Operation Mixed Fund (FOF-LOF), and China Euro Huixuan One-year Closed Operation Mixed Fund (FOF-LOF).
Five fund companies including GF, China Europe, Xingzheng Global, Bank of Communications Schroders, and Minsheng Jiayin Fund took the lead in this round of innovative product competition.
Judging from the approved products, they have set up closed operation periods ranging from 6 months to 3 years, and each public fund quota also chose different custodial banks as fund custodians.
It is reported that the FOF-LOF products currently applied for by the Shanghai and Shenzhen Stock Exchanges have three main characteristics: the product type of FOF, the closed operation or regular open operation method, and the listing arrangements of LOF.
Among them, the closed operation mode helps fund managers operate smoothly during the closed operation period, reducing the impact of investors' redemption on investment operations. The LOF's listing arrangement provides investors with a certain amount of liquidity. The product differences between fund companies in the industry are mainly reflected in investment strategies. From the perspective of application situation, they can be roughly divided into stock FOFs, equity-oriented mixed FOFs and debt-oriented mixed FOFs with industry rotation as the main strategy. Yang Zhe, co-general manager of the asset allocation department of GF Fund , said that more than ten FOF-LOF funds have been accepted by CSRC . In summary, there are three main characteristics: First, the companies that apply for FOF-LOF are mainly large and medium-sized fund companies, and generally pay more attention to product innovation; Second, the closed period is not particularly long, and most products have a closed period of less than 1 year. The short closed period will help that the trading price will not be significantly discounted after listing and trading; Third, ETF-LOF also appears in the FOF-LOF this time. The products are mainly invested in ETFs. In principle, the closing price of ETFs can be used to achieve T-day valuation, which improves the valuation timeliness of FOF products and is also an innovation of FOF products.
"FOF-LOF is an innovative category of FOF products. Its biggest feature is that it has the advantages of both FOF and LOF products." Yang Zhe said that FOF products diversify risks, smooth fluctuate, and improve portfolio return risk ratio through asset allocation, thereby optimizing investors' holding experience, which is very suitable for investors who pursue medium- and long-term stable value-added assets. Most of the current FOF products have the shortest holding period requirements. FOF-LOF provides liquidity for FOF product holders in the closed period. If investors have short-term monetization needs, they can exit through on-site trading.
Talking about the original intention of launching this type of product, Yang Zhe said that we hope to provide holders with more liquidity through FOF-LOF products and further enrich the company's FOF product line. Taking the relevant products declared this time as an example, if an investor has temporary capital demand during the lock-in period of one year after buying, he can sell it through on-site trading. In other words, while meeting investors' liquidity needs, it will not have too much impact on the fund's investment operations, which can be said to have won multiple goals in one fell swoop.
China Europe Fund also believes that FOF-LOF provides on-market investors with a product that is more in line with their usual trading habits. On the one hand, this will help securities companies transform from brokerage business to wealth management; on the other hand, it is helpful for realizing the transformation from investors to investors, solving the problem of high retailization in the stock market, and promoting investors' long-term investment. Of course, for over-the-counter investors, on-the-counter trading also provides them with a new trading channel.
Xingzheng Global also stated that one of the biggest features of FOF-LOF is that it can trade on the market, striving to better meet the liquidity needs of some investors. In addition, after the three-year closed operation period ends, our product will be converted into a marketed open FOF product and will no longer be set up. Through the FOF-LOF setting, investors with liquidity needs can provide trading opportunities. In addition, it will also help increase the attractiveness of FOF products and make more people pay attention to the FOF product category.
More products are on the way
Leading companies have increased their layout
In addition to the above five approved innovative products, as of September 23, there are currently 12 FOF-LOF products under 10 public offerings including Cathay, Huaxia , E Fund , Investment Fund , and Investment Fund . Most of the products have been accepted. Among them are many leading fund companies.
Judging from the latest fund approval progress list disclosed on the website of the China Securities Regulatory Commission, there are currently 12 FOF-LOF products reported, and the application materials acceptance date is basically from August 13 to 27. On September 6, E Fund also reported the E Fund Advantage Foresight two-year closed-operation mixed fund (FOF-LOF) product.
The leading companies have made greater efforts to lay out products. Fund companies such as Huaxia, E Fund, Cathay Pacific, and GF have all reported two FOF-LOF products, showing their importance to this type of products.
Currently reported products, these products are mainly mixed and stock FOF-LOF products, both adopting a regular closed operation model, ranging from 3 months to two years, and most of them are closed operation products in one year.
Some products focus on the concept of "fixed income +". As Xu Ran of China Merchants Fund introduced, the Zhixing Steady Allocation One-year Closed Operation Mixed Fund (FOF-LOF) submitted by China Merchants is a debt-biased hybrid FOF, mainly based on the analysis of future market demand. In the post-epidemic era, the major global markets may be in a low-interest or negative interest rate market environment for a long time, and the returns of fixed income assets are down, and the stable return strategy FOF is an alternative product type for investors; second, the transition period of the new asset management regulations has entered the countdown, and bank wealth management products will fully realize the net value transformation, the yield of wealth management products may decline, and the net value fluctuations will also increase. FOF has achieved secondary dispersion of risks through asset allocation, which will help improve the risk-return ratio, and the market potential of the products is greater.
According to a product person in a fund company, compared with ordinary FOF products, FOF-LOF is an innovative category. The biggest feature is that it provides liquidity for FOF product holders in the closed period, which can increase the attractiveness of the product. "At present, we are doing relevant research and market research, and our company will also plan this type of product."
However, some industry insiders believe that they are still waiting for the market demand of this type of product and decide whether to report it based on the actual situation.
Talking about the phenomenon that various public offerings actively deploy FOF-LOF products, Yang Zhe believes that FOF-LOF has liquidity advantages over current FOF products. As such products are gradually recognized by the market, more and more newly issued FOFs will adopt this form. If they run smoothly, FOF-LOF is very likely to become one of the important product forms in FOF products in the future.
lowers the FOF investment threshold
FOF-LOF future market space
0F FOF products born in 2017 finally ushered in a "big New Year" this year. Not only has hot funds been released one after another, but the performance of this type of product is also more recognized by the market. Many people believe that with more and more investors in FOF products, FOF-LOF has huge future market space.
data shows that as of June 30, 2021, there were 162 public FOF funds in the entire market, with a total scale of more than 134.365 billion yuan, and are in a period of rapid development of scale.
Yang Zhe said that for investors, in the past, when investing in FOF, they must plan the funds invested in FOF in advance. For example, before subscribing to a product with a minimum holding period of 1 year, they must make plans for the lack of use of this fund within one year. If you invest in FOF-LOF, you can sell it through on-site trading, which solves the problem that you cannot cash out during the closed period when investing in FOF products. Therefore, FOF-LOF has to some extent lowered the threshold for FOF investment and expanded the potential customer base of FOF products.
Another industry insider believes that whether products like FOF-LOF will be promoted on a large scale in the end depends on the fund's positioning and investors' needs. If the trading demand is strong, more such products may be created.
However, referring to the existing LOF products, Yang Zhe also reminds that investing in FOF-LOF requires attention to the possible discount and premium risks.
Yang Zhe said that FOF-LOF may have certain discount and premium risks in operation. FOF products are generally valued on T+1 day, while on-market transactions must be conducted in real time. The trading price is actually determined by the trader. Therefore, the trading price and net value of the product may vary, which we generally call discount premium risk.
"Of course, the existence of an arbitrage mechanism will keep the discount and premium fluctuating within a reasonable range." Yang Zhe said that if the FOF is in the stage of open redemption (such as investors who meet a certain holding period can redeem it), when the on-site price is too high, investors can make arbitrage by subscribing and selling on-site; conversely, when the on-site price is too low, they can make arbitrage by buying on-site and redemption on-site.
Edit: Xiaomo
