Financial Services Association, August 20 (Reporter Shen Shuhong) Recently, the central bank has guided long-term bond trading and strengthened risk prevention and control. The bond market has clearly adjusted, and the income of some fixed income funds with bond assets as the main allocation direction has also declined. In the past two weeks, the net worth of more than 3,000 bonds has declined, accounting for as much as 82%.

Behind many factors affecting market changes, such as changes in central government policies, economic fundamentals, and monetary policy, the number of individual investors who are sensitive to fluctuations in the bond market is increasing, and the hidden wave of debt-based retailing behind it is also getting more and more attention.

According to the data, the average holding ratio of individual investors in publicly funded prudent products has risen from 25.61% in 2022 to 27.48% in 2023. Among previous fluctuations in the bond market, short-term bond fund investors also showed more sensitive characteristics; individual investors in medium- and long-term bond funds were more sensitive and faced with higher redemption rates.

Under the wave of retailing, how to meet the new needs of investors in terms of product layout, credit strategy, product liquidity management, and debt-side guidance is gradually becoming the focus of more and more fund companies.

The retail wave behind the bond market shock

Since December 2022, the short-term pure debt fund index has maintained positive monthly returns for 19 consecutive months.

However, the sudden adjustment of the bond market brought to an abrupt end many investors' dreams of “reaping eggs every day” and “making positive returns every month.” As of August 16, the net worth of more than 3,000 bonds had retracted in the past two weeks, accounting for 82%. The net value of over 80% of medium- and long-term pure bonds fell, with an average yield of -0.13%; nearly 60% of short-term debt funds had retreated in the past two weeks, with an average yield of -0.03%.

A fund company source revealed that under the guidance of market conditions and product marketing rhetoric over the past period, individual investors have not formed sufficient reasonable expectations about the fluctuations they may face, which increases the possibility of investors overreacting when fluctuations occur.

The impact of this excessive reflection on the bond market is based on a growing group of individual investors. Research reports from Shanghai Securities show that since the new asset management regulations were officially fully implemented, a large amount of retail customer capital has been attracted to prudent publicly funded products. From 2022 to 2023, the average holding ratio of individual investors in this type of product increased from 25.61% to 27.48%. Against the backdrop of a 26.24% growth rate of bond funds from 2022 to the first quarter of this year, the growing individual investor base has had a significant impact on the bond market.

However, in the previous 2022 bond market fluctuations, there is no doubt that individual investors are highly sensitive to market fluctuations such as medium- and long-term bonds. By the end of 2022, the shares of medium- and long-term pure debt funds and short-term pure debt funds decreased by 14.73% and 35.96%, respectively, compared to the end of the previous quarter. Among them, individual and institutional shares of medium- and long-term pure debt funds decreased by 14.96% and 6.38%, respectively, compared to mid-2022, while individual and institutional shares of short-term pure debt funds decreased by 26.23% and 33.60% respectively.

This also means that at the time, the individual and institutional ownership ratio of short-term debt funds was already relatively close. Compared to medium- and long-term debt-based investors, short-term debt fund investors were more sensitive to fluctuations and faced higher redemptions. Medium- to long-term pure debt funds are still dominated by institutional investors in terms of holder structure. Facing fluctuations, individual investors are more sensitive and have a higher redemption ratio.

The way to deal with it

Under the wave of retailing, how to meet the new needs of investors in terms of product layout, liquidity management, and investor support is gradually becoming a question for more and more fund companies to think about.

According to data provided by Tianhong Fund, among the company's bond fund products at the end of last year, the number of holders weighted by size was among the highest among fund companies with a bond management scale exceeding 100 billion dollars, and individual investors held a high proportion of 32.93%. Looking at the ability to control the pullback, Wind data shows that as of August 15, the average maximum retracement of all short-term debt products under Tianhong Fund since this year was -0.10%, and the average maximum retracement of short-term debt products in the entire market was -0.17%.

To meet the new needs of investors in the debt-based retail era for retracement control, Tianhong Fund's solutions focus on investment philosophy, investment frameworks, credit strategies, product liquidity management, and debt-side guidance.

Specifically, its bond investment philosophy is to seek steady progress. Through the “Tianhong Five Cycle” framework, which focuses on macroeconomic cycles, monetary policy cycles, behavioral cycles, position cycles, and mood cycles, it strives to create long-term and stable absolute returns for customers under the premise of optimal risk and return allocation; at the level of credit strategy, it does not sink credit, but instead explores high-quality securities that are mispriced based on an independent and strict credit evaluation system. The distribution of product positions is divided into bottom positions, bottom holder+, and enhanced positions. The relevant ratios will restrict risk and return requirements such as product positioning, customer groups, etc. The conditions are determined. In addition, in addition to producing a series of fixed income investment education content, the company also encouraged fund managers to actively speak out to investors when the market was in a bubble, and to be brave in restricting purchases when the bond market was at a high level in the second half of 2022 in the face of institutional money.

A fund company in East China added that a strong talent pool, perfect investment structure, credit evaluation system, and ability to allocate major assets are the cornerstones of the company providing good bond product services for investors. However, on this basis, investor services and investment education work for various platforms and channels are also important. When working in bond fund investment education, the company now pays more attention to individual investors' pain points and strives to transform the grand narratives and difficult and difficult investments related to bonds into topics they are interested in, so that investment companionship is deeper and more relevant to reality.

Bosch Fund also stated earlier that the company mainly explores ways to combine various assets from an increasing number of fixed income investment types and fixed income types to develop multi-asset and multi-strategy investment products from the perspective of investors.

Choice at the crossroads

Although more than 80% of bond funds have retreated to varying degrees in the past two weeks, the vast majority of bond funds are still positive. Only a few products, such as Huaxia Anyi Short-Term Debt, Huaxia Dingfu, and Jinxin Minfu, have experienced some losses, and many products have shown excellent resistance to falling.

According to Wind data, as of August 16, the biggest retracement of 133 short-term debt funds since this year, including Harvest's 6-month financial management, one-year investment promotion, and Tianhong Hongze short-term bonds, was within the 0.10% range, while 262 medium- and long-term bond funds did not exceed 0.10% during the year.

According to Zou Deli, assistant general manager of Great Wall Fund, general manager of the cash management department, and fund manager, the recent bond market adjustments were mainly affected by the regulatory authorities's preventive measures against the risk of medium- to long-term interest rate fluctuations. Against the backdrop of loose liquidity and scarce assets, yields are expected to decline further.

“However, when yields fall to a certain extent, the central bank may still intervene in due course, which may lead to a brief correction in the bond market. The pullback period may be a good opportunity to intervene.” Zou Deli said.

Yin Liyu, head of the Tianhong Fixed Income Credit Debt Management Team and manager of Tianhong Xinli Fund, analyzed that after the central bank further interfered in the bond market on August 5, it was difficult to predict the duration and extent of the impact, so they remained cautious and reduced the duration and leverage. In the second half of last week, the central bank opened the market to take care of capital, so it slightly increased the period and leverage. It plans to maintain the current level and take the opportunity to operate according to market conditions.

Peng Wei, head of the company's fixed income commercial fund management team, Tianhong Ruixuan, and Tianhong Qixiang Fund fund manager, analyzed the current bond market situation from the institutional behavior cycle. He said that mainstream participants in the bond market can be divided into trend trading accounts (fund companies, etc.), high-frequency trading accounts (brokerage firms, etc.), and remaining liquidity allocation accounts (agricultural and commercial banks, etc.), all of which have their own behavioral characteristics.

Peng Wei further explained that during last week's adjustments, agricultural commercial banks are still adjusting purchases every time, and insurance companies have even increased their purchasing power, so the results seen are that the adjustment was lower than expected. This stage is different from every stage of institutional behavior. With the reduction in fund positions, not only did it have a huge impact on market adjustments, but on the contrary, it increased the buying power of the value allocation plan and the remaining liquidity allocation plan, reflecting the intensification of this year's “allocation capital golden bull” logic. The background behind this behavioral model reflects weak credit and a further decline in residents' risk appetite. Looking ahead to the future market, holding is the best strategy; however, in a stage where regulatory information is frequently distributed, the financial and financial probability will stabilize for some time to come. The odds of trading long are not high; they will still pay attention to the market and take the opportunity to operate.

“Compared with the past 10 years, the current bond interest rate center has declined by a certain margin. However, in the medium term, the growth rate of the domestic economy is expected to remain at a certain level. Bonds can still provide certain interest rates and form a certain hedging relationship with other assets. Therefore, domestic bonds are still the cornerstone of asset allocation. Furthermore, as risk-free interest rates declined, the yield created by bond assets declined.” Wells Fargo Fund said that investors also need to adapt to current changes in mentality. Profit and risk go hand in hand. While looking forward to increasing returns, they also need to be aware that potential fluctuations are also increasing. In the era of full net worth, short-term asset price fluctuations should be viewed with a more rational mindset.