Interview With Li Wen, Chairman Of Huitianfu Fund: The Development Of Public Funds Is Only The Beginning

After 30 years of development, China's capital market has gone through a hundred years of overseas capital market in repeated exploration, and public funds have also been developed by leaps and bounds.

With the development of public fund industry, Chinese investors have changed from "shareholders" to "funders". Since 2020, there have been frequent fund explosion, and the scale of public fund industry has been growing by leaps and bounds. Is this a sign of the coming of the era of public offering? What is the future development prospect of China's public funds?

For this reason, the 21st century economic reporter interviewed Li Wen, chairman of huitianfu fund. He believed that the development of public fund is only the beginning. China's public fund industry is facing historical development opportunities. In the future, in the process of high-quality development of China's capital market, the public fund industry will assume greater responsibilities.

Hard start

21st century: How did you enter the capital market?

Li Wen: I was admitted to the accounting department of Xiamen University in 1986. When I graduated, I joined Xiamen Branch of the people's Bank of China.

In the 1990s, the people's Bank of China was mainly responsible for financial management and supervision, in addition to issuing currency and operating the state treasury. The audit office where I work is responsible for the inspection and supervision of banks, insurance, securities, trust and other financial institutions in the jurisdiction. Therefore, I have the honor to witness and participate in the reform of the shareholding system and the establishment of the securities market in the 1990s, and have a real contact with the capital market.

In August 2001, he joined Dongfang securities. At that time, the stock market began to enter a long bear market. The Shanghai stock index dropped slowly from 1800 points at that time. Until June 2005, when huitianfu fund was preparing to issue the first fund product, the Shanghai stock index fell below 1000 points.

21st century: would you please talk about the preparations for the establishment of huitianfu fund in those years?

Li Wen: when I was in charge of the capital and financial work of Dongfang securities, I had already participated in the preparation process of the predecessor company of huitianfu fund. In April 2004, Mr. Lin Lijun came back from the United States and was responsible for the preparation and construction of huitianfu fund as the proposed general manager. I was appointed by Dongfang securities as the proposed inspector general to participate in the preparation.

When huitianfu was founded in February 2005, the securities market was very depressed. In addition, the product performance of some fund companies in the early stage was not ideal. At that time, there was a saying of "fire prevention and anti-theft fund". Under such a background, huitianfu, as the 47th fund company in the industry, has no performance accumulation and no company brand. It can be said that the starting is difficult and the prospect is not optimistic.

In July 2005, we began to issue the first fund product - huitianfu advantage selection. Although the market environment was very difficult, the entrepreneurial team was full of passion and indomitable spirit at that time. Facing the cold market and facing the hot temperature, the whole staff worked together to market. After a month and a half of issuance, the product successfully raised 1.03 billion yuan with the strong support of shareholders and ICBC, the trusteeship bank, which set a new high in the market at that time.

Looking back, we are really very lucky. In 2006, China's capital market launched a series of reform measures, including the reform of non tradable shares, which brought about the vigorous development of the A-share market. Huitianfu advantage selection in the past 16 years has accumulated more than 22 times, with an annualized yield of more than 20%, which can be said to have brought huge returns to investors. At that time, the hardships and difficulties also became valuable wealth.

Enlightenment of growth

21st century: what is huitianfu's experience from the establishment of the 47th company in the industry and its development to the head of the industry?

Li Wen: if huitianfu has made some achievements today, I think the most important experience is that we always insist on doing the right things, doing long-term things, and strengthening the core competitiveness of the company's development.

We are committed to building a stable and long-term corporate governance. Corporate governance is the foundation of long-term development of asset management institutions. Huitianfu's three founding shareholders have maintained a high degree of stability and a balanced equity structure. The assessment of the company's senior executives focuses on the long-term and endows the company with a market-oriented operating mechanism. In 2016, the company took the lead in implementing employee equity participation in the industry, realizing the binding of interests of employees, companies and shareholders.

What's more, we have been committed to formulating and adhering to a clear and forward-looking development strategy. Strategy leads the development direction of the company. Through strategic guidance, huitianfu has formed significant advantages in active rights and interests, channels, large institutions, Internet Finance and other aspects. It also focuses on the long-term and adheres to the international strategy and personal pension strategy.

At the same time, huitianfu has always attached great importance to building a passionate, United, professional and stable talent team. The asset management industry is a "human cooperation" industry, and human resources is the most important asset. Huitianfu adheres to independent training and long-term assessment. It recruits from top universities at home and abroad every year. Through rich training system, it makes every employee become the "hard head" in the industry. Through competitive salary and excellent culture, the staff turnover rate is far lower than the average level of the industry.

In addition, huitianfu has been striving to build an efficient and standardized management system. Management is the guarantee to realize the long-term stable operation of asset management institutions. Huitianfu attaches great importance to internal management. Since 2007, huitianfu has formulated the company's annual number, determined the annual work theme, continuously improved the management system, strictly abided by the compliance risk control bottom line, attached great importance to the role of financial technology, continued to increase it talent and capital investment, and provided technical support for business development and management optimization.

Finally, we are committed to creating an excellent corporate culture. Culture is the soul of a company. Over the past 16 years, huitianfu insists on inheriting and innovating the corporate culture with huitianfu characteristics, and gradually establishes a set of perfect corporate culture system. For example, the company adheres to the mission of "customer first, employee second, shareholder third", the strategic goal of "building the most recognized asset management brand in China", and the business philosophy of "starting from the long term".

New layout

21st century: huitianfu started with active investment. Does huitianfu have a layout for passive investment which has developed rapidly in recent years?

Li Wen: huitianfu has regarded the ability of active equity management as the core strategy of the company since its establishment. However, while developing active equity, we are also actively arranging passive investment. We believe that passive investment is an inevitable trend in the development of public fund industry. In recent years, the development of index products is also very fast. Take ETF as an example, wind data shows that by the end of 2020, the domestic stock ETF has accumulated 801.4 billion yuan. Especially in the past year, thanks to the structural market of A-share market, the industry theme ETF has achieved rapid development, with an overall scale growth of more than 90 billion yuan.

As for the layout of ETF of huitianfu fund, in terms of industry theme, we hope to give full play to the company's stock investment and research ability and select industries or themes with long-term investment value to develop index products. At the same time, the company will further integrate the investment and research advantages into the index development and customization process, and cooperate with index companies to develop more index products with long-term vitality. At present, the company has laid out the subdivided industry theme index products in consumption, medicine, TMT, high-end manufacturing and other directions with long-term development potential. For example, in the pharmaceutical industry, vertical subdivision index products have been arranged in the subdivision fields of biotechnology, precision medicine, biomedicine, Internet medicine, traditional Chinese Medicine, etc.

As for the broad base ETF, we focus on the more dynamic broad base index with the domestic economic transformation and upgrading and the improvement of the stock index structure. For example, huitianfu issued the Shanghai, Hong Kong and Shenzhen 500 ETF this year. We believe that under the trend of continuous integration of A-share and Hong Kong stock, the Shanghai Hong Kong Shenzhen 500 ETF includes the leading listed companies in the two places and three cities, and is a high-quality tool for investors to allocate core assets of a shares and Hong Kong shares.

In addition, in the past few years, huitianfu has also arranged some characteristic regional theme index products, such as "Shanghai state-owned enterprise ETF" and "Yangtze River Delta integration ETF". At present, under the guidance and support of Shanghai municipal government, it is carrying out the product development of "Zhangjiang independent innovation ETF". In the future, huitianfu will continue to explore the path of financial innovation to serve the real economy and the national strategy, and continue to carry out the research and development of characteristic regional theme index products.

21st century: what is the main innovation direction of huitianfu in recent years?

Li Wen: huitianfu's innovation is reflected in the innovation of corporate governance, organization and management, product innovation and financial technology innovation. In terms of corporate governance, we took the lead in completing employee equity participation in the industry, and continuously improved the equity participation mechanism, achieving long-term consistency of interests among shareholders, employees and customers, and building a community of undertakings and a community of common destiny.

In terms of organization and management, the company has innovatively established a vertically integrated investment and research organization structure. On this basis, through the empowerment of information technology, the company has comprehensively improved its investment management ability and formed its own brand advantage. It is known as "stock selection expert". With excellent long-term investment performance, the company has won the recognition and trust of fund holders and institutions at home and abroad.

In terms of products, we are based on customer demand, serving the real economy and national strategy externally, serving the company's development strategy internally, matching the company's capacity building, and always pursuing viable products. Huitianfu has established a complete product line through continuous innovation, creating dozens of No.1 in China's fund industry.

Another innovation of huitianfu is in financial technology. In July 2009, we launched the industry's first online trading cash management account "cash treasure", and relying on the "cash treasure" platform, we innovatively launched "index treasure" and "salary treasure" and other functional modules to consolidate the platform foundation, continuously innovate, comprehensively improve the customer experience, and become one of the largest self owned e-commerce platforms in the industry.

The future of China's public offering

21st century: how do you evaluate the great development of public funds in 2020?

Li Wen: since last year, the sales of public funds, especially stock funds, have been very popular. Huitianfu has also issued a number of funds with a scale of more than 10 billion yuan. In my opinion, the sales boom of public funds is closely related to the good earning effect of stock funds, but there are also some deep-seated reasons behind it.

One is that residents have a strong demand for financial management. At present, savings still account for half of the financial asset allocation of households. Meanwhile, the downward market interest rate, "no speculation on housing and housing", and the deepening implementation of new regulations on asset management have made the financial needs of residents increasingly vigorous. The other is increased investor confidence. Investors are full of confidence in China's achievements in fighting the new crown pneumonia epidemic, in China's long-term good economic prospects, in deepening the reform of the capital market and achieving high-quality development.

In addition, investors' trust in public funds is increasing. The development of public funds for more than 20 years has experienced a process from unfamiliar to familiar with investors and gradually recognized by investors. Investors have increasingly realized that public funds are the most professional institutional investors in fulfilling their fiduciary obligations. At the same time, the impression that "funds make money but investors do not make money" has gradually improved.

We hope that the popularity of the fund is not a flash in the pan, but can become a normal; we hope that the market can walk slowly and become a steady bull; investors can invest for a long time, hold the fund and have a better investment experience. At the same time, we also hope that investors can pay attention to public funds just like real estate, and take the fund as the property allocation of family basis.

The 21st century: the construction of the third pillar of China's pension has started. What role do you think public funds play?

Li Wen: in the construction of the third pillar of China's pension, public funds will play a very important role. Pension is a kind of long-term fund in essence, which can bear high liquidity risk and short-term fluctuation risk. The biggest risk of pension investment is not the risk of short-term fluctuation, but the risk of long-term purchasing power loss. Therefore, equity assets are naturally compatible with pension investment. More than half of the third pillar of the US pension system is invested in equity assets.

The equity investment ability of public funds is in a leading position in the whole asset management industry. Since its establishment, the public fund industry has established an advanced system, always adhering to the concept of value investment and long-term investment, forming an excellent investment team. In practice, public funds have become the main force of pension investment management in China, playing an important role in the investment management of national social security fund, basic pension fund, enterprise annuity and occupational pension. According to the data, the scale of the national social security fund in 2019 will reach 2.6 trillion, of which about 60% will be managed by public funds. From the establishment in 2000 to this year, the return on stocks will exceed 8%, and the return on stocks will exceed 15%, which will achieve good investment benefits. In addition, as an important tool of public financial management, public funds have been actively serving residents' pension financial needs in practice.

In recent years, public funds actively promote the construction of the third pillar of personal pension, and actively prepare for the pilot of the third pillar. As of December 31, 2020, the industry has launched more than 100 pension fof products with a total scale of more than 50 billion yuan. Galaxy securities data shows that the average net value growth rate of fof products in 2020 will reach 24.79%, second only to the performance of stock funds and hybrid funds.

It is believed that in the future, with the implementation of the policy of individual pension investment in public funds, public funds will be able to give full play to their professional advantages, make use of rich product system and perfect investment advisory services, and contribute more to the maintenance and value-added of pension industry.

21st century: how to treat the rapid development of ESG investment in recent years?

Li Wen: China's ESG responsible investment is still in its infancy, but it has also developed rapidly in recent years, mainly due to the dual drive of regulatory guidance and foreign capital inflow. From the perspective of internal driving force, the Chinese government attaches great importance to the implementation of the sustainable development agenda. The central government has put forward the goal of "striving to achieve the peak of carbon dioxide emissions by 2030, and strive to achieve carbon neutrality by 2060". The regulatory authorities have also successively issued relevant policies to encourage the development of ESG responsible investment, and actively established a long-term mechanism in line with green investment or ESG responsible investment norms, which is the ESG The development of the concept of responsible investment brings great opportunities. From the perspective of external driving forces, China's financial market has been more open to the outside world, which has created a huge space for the development of ESG's responsible investment concept. Overseas mature ESG concept helps to enhance the awareness of domestic responsible investment and international vision. At the same time, it puts forward urgent requirements for the construction of domestic ESG system, and the entry of overseas long-term funds will also stimulate more asset management institutions to participate in ESG responsible investment 。

Driven by both internal and external drive, domestic asset management institutions, including social security, public funds, insurance and other institutional investors, are paying more and more attention to ESG responsible investment, and gradually explore the path of ESG responsible investment. According to the statistics of China's annual report on responsible investment 2020, by the end of October 2020, a total of 49 fund companies have released 127 pan ESG funds. The market scale of ESG funds is about 120 billion yuan, which is double the same period of last year.

At present, China's ESG responsible investment still faces some challenges, such as the lack of awareness and Research on ESG responsible investment, the lack of ESG evaluation system applicable to the Chinese market, and the lack of high-quality and standardized disclosure data. Although the development of ESG responsible investment faces many challenges, we can also see that, on the one hand, people's intergenerational values are changing. With the intergenerational transmission of wealth, the new generation's value orientation will have a greater and greater impact on the capital market, thus making sustainable investment more popular; on the other hand, the concept of institutional investors' responsible investment is strengthening With the maturity of capital market, institutional investors who practice responsible investment will take the absolute advantage of the market. Sustainable investment and sustainable development are bound to become the theme of the times. I believe that in the future, ESG responsible investment will develop faster and attract more investors at home and abroad.

In recent years, huitianfu has actively advocated and promoted ESG responsible investment, joined the UN PRI organization, established a special ESG research team, improved the ESG investment and research system, and issued ESG products to further improve the investment philosophy.

In the future, we will continue to deepen the construction of vertical integration of investment and research, deeply practice ESG responsible investment, actively play the advantages of professional institutional investors, and better help the sustainable development of enterprises and society.

21st century: under the background of the popularity of public funds, what suggestions do you have for investors?

Li Wen: I think we should make rational investment first. We should set a reasonable financial goal according to our own situation. We should not excessively pursue the goal of high yield. We should know that the income and risk are always matched. High yield is bound to be accompanied by high risk. There is no free lunch in the world. Investment funds should consider liquidity issues, not short-term funds for long-term investment, nor should long-term funds only for short-term investment; of course, we should not borrow money for investment, we must invest with our own money.

Diversification is also important. It is often said that you should not put all your eggs in one basket. Only through the diversification of investment, can we better spread the risk and obtain long-term stable returns. Investors should build their own portfolio according to their own income target, risk preference and liquidity demand, which can not only achieve the investment goal, but also reduce the anxiety in investment. Fof is a kind of good product.

Finally, the most important thing is to invest in the long term. The market is volatile and short-term. Only by persisting in long-term investment can we overcome the fluctuation of bull and bear, be a friend of time and make money for the growth of listed companies.

Sticking to the long-term is the most important and the most difficult thing to do in investment. There are several tips to share with you. The first is to invest in funds with fixed investment; the second is to invest in funds with a closed period; the third is to invest in pension target funds. The pension target date fund takes into account the advantages of long-term investment and portfolio management. It will make dynamic asset allocation adjustments according to the life cycle of the holders, especially for young people.

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