Supervision Focuses On Style Drift Of Mutual Fund, And Some Products May Be Involved In Contract Breach

Theme fund style drift has been a persistent problem in the fund industry, and now this situation is improving.

Recently, the market came out that the regulatory authorities focused on some fund products with style drift, and relevant funds also adjusted the positions of fund products.

In this regard, the 21st century economic reporter learned from many sources that the regulatory authorities are indeed paying attention to the problem of fund style deviation. "In fact, not only recently, the supervision began to pay attention to relevant issues in the first half of the year, especially the products suspected of contract breach." a person from a fund company in South China said that the fund company was also adjusting.

Previously, the 21st century economic reporter has investigated and reported the phenomenon of fund style drift (for details, please refer to "style drift of public funds falling into compliance Rashomon: three categories" do not live up to the name ", involving nearly 40% of fund companies, and affecting many top class funds). Generally speaking, there are three types of funds with style drift in the market, namely, small and medium-sized funds buying large cap stocks, small and medium-sized funds, large cap funds, and so on There are three types of "pseudo" quantitative funds and theme funds that do not live up to their names, involving nearly 40% of fund companies, as well as several top-notch funds, including ICBC Credit Suisse sports industry fund managed by star fund manager Yuan Fang.

The latest information shows that the problem of style drift of theme funds is improving. Some fund companies have successively submitted application for product transformation to the regulatory authorities, or held a general meeting of shareholders to amend fund contracts, so as to expand the scope of investment.

Regulatory focus on fund style drift

Under the extreme differentiation of market style this year, public fund products do not live up to their names, and this "unhealthy trend" is becoming more and more fierce.

According to the latest data, as of the end of the second quarter, the domestic lithium battery leader Ningde era has as many as 1362 funds. Among these funds, there are many theme funds that have nothing to do with new energy, including BAOYING artificial intelligence fund, Boshi Internet theme fund, Jiashi sports and Entertainment Fund, Huaxia state-owned enterprise reform, Yinhua Internet theme fund and Meili town theme fund of ICBC Credit Suisse.

Not only that, at the end of the second quarter, there was no sports fund with heavy positions in stocks and sports, and it was not uncommon for cultural and entertainment funds with heavy positions in new energy in the market. Some funds deviated from the theme, while some funds even involved in default.

Therefore, the situation of contract breach caused by fund style drift is focused on by supervision.

Recently, some funds with a relatively large style drift have attracted the attention of the regulatory authorities and required to make explanations. According to the reporter's understanding, in fact, the supervision began to pay attention to relevant matters in the first half of the year, and required the fund company to conduct self inspection, and then rectify according to the self inspection situation.

"In fact, regulators have been paying more attention to the style drift of funds, but we can't generalize. The nature of products involving contract breach is relatively serious," said the inspector general of a public offering fund in Shenzhen

A person from a head fund company in South China believes that if the fund manager fails to do what is clearly stipulated in the fund contract, whether or not he has made money for the basic people, it is actually a violation of the fiduciary duty of the industry and should be corrected.

Some funds may be involved in contract breach

According to a fund company, the focus of supervision is on contract breach caused by style drift.

From this year's situation, theme funds such as entertainment and sports have become the disaster areas for fund style drift and fund contract breach. Among them, many funds have invested heavily in new energy, such as the sports industry fund of ICBC Credit Suisse managed by Yuan Fang, the top fund manager of Mesozoic era.

By the end of the second quarter, the top ten stocks of ICBC Credit Suisse sports industry fund were Ningde times, Hikvision, Qingdao beer, Fuyao Glass, Yaoming Kant, Ruike laser, Gujing gongjiu, Yili shares, China Unicom and Wuliangye.

According to the prospectus of ICBC Credit Suisse sports industry fund, the proportion of the fund's investment portfolio is mainly composed of 80% - 95% of the fund's assets, of which the stocks invested in the sports industry defined by the fund shall not be less than 80% of the non cash assets.

At the same time, the fund gives a clear scope on the definition of cultural industry. The cultural industry includes traditional cultural industry, emerging cultural industry and cultural related industries.

However, at the end of the second quarter, the fund's culture, sports and entertainment industry accounted for only 2.65% of the net asset value of the fund, which was far lower than that of the manufacturing industry, information transmission, software and information technology service industry. Therefore, a person from a fund company in South China believed that it was inconsistent with the contract and violated the agreement of the fund contract.

Some people in the industry said that the reason why many fund companies tolerate the style drift of some fund managers is that some product styles drift well and make money for investors. In particular, if some theme funds of culture and culture and education insist on investing in sports and education companies, their net worth will drop and investors will redeem them accordingly. This is what fund companies and fund managers do not want to see.

"If investors buy the theme fund, but the actual position of the stock does not live up to the name, this is a kind of misleading, suspected of violating the contract." Huang Jiangdong, senior consultant of Guohao law firm, believes that although this kind of misleading is not a mistake in principle, it also needs to be handled properly.

The problem of style drift is improving

On September 10, e Fund released the announcement on the voting results of the meeting of small and medium cap unit holders and the effectiveness of the resolution.

The announcement showed that "e fund medium and small cap mixed" was officially changed to "e fund high quality selection", the investment scope was expanded to a shares and Hong Kong stocks, and the fund manager was still Zhang Kun.

Before the contract is changed, the investment scope of the fund stipulates that the assets of the small cap stocks it invests in shall not be less than 80% of the stock assets. However, due to the management scale is too large, the fund's heavy positions are mostly blue chips.

After the change of fund contract, the proportion of investment portfolio is stock assets, accounting for 60% - 95% of fund assets. Among them, 50% - 100% of the stock assets are listed in the mainland market, and 0-50% of the stock assets are listed in the Hong Kong market.

In addition, some fund products are applying for product transformation.

Huitianfu environmental protection industry fund applied to be changed into huitianfu new energy industry fund. On August 11, the product transformation application received feedback. At the same time, the application of the southern modern education fund of China Southern Fund was changed to the southern industry intelligent selection fund, and the application was accepted on August 26.

Fund industry insiders said that the style drift is not too serious fund, may carry on the adjustment position to exchange shares, this needs a process.

For some concept themes without performance support and derivative concept theme funds, industry insiders suggest that fund companies should reduce the issuance of some new products, increase efforts to change the investment scope of these theme funds in accordance with the contract, and make changes after the holders pass the new voting scheme.

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