Summary of Key Points
The mid-year reports of public funds have introduced a new metric: the “proportion of investors who made a profit in the past year.” For the first time, this metric quantifies the issue where a fund may be profitable, but its investors may not be. The data shows that nearly 70% of funds have helped more than half of their holders to make a profit. However, there are counterintuitive phenomena: some funds have increased in value by 68%, yet only 15% of their investors have profited; other funds have decreased in value by 16%, yet 75% of their investors have still made a profit. The main reason is the mismatch between the timing of investors’ entry into the fund and the fund’s performance over the period. This metric encourages the industry to shift from focusing on product performance to focusing on the actual benefits investors receive from the fund. Nevertheless, it has its limitations, and it should be viewed with a critical eye.
1. The New Metric: Investors’ Profits Are No Longer a Mystery
What is this new metric? Simply put, it calculates the percentage of investors who have made a profit (out of every 100 investors) within the past year (from July last year to June this year) who have held the fund for at least 7 days. Previously, people only looked at whether the fund’s net value had increased; now, we can directly see how many investors actually made a profit.
Looking at the data, among the 105 funds that have released their reports, nearly 75% have helped more than half of their holders to make a profit, and 40% of these funds have helped over 90% of their holders to profit (for example, Ruiyuan Growth Value A increased in value by 115%, and 99.68% of its holders made a profit). However, there are extreme cases: Galaxy Value Growth A increased in value by 68%, but only 15% of its investors profited; Ping An Value Youxiang A decreased in value by 16%, yet 75% of its investors profited. These figures highlight the gap between fund performance and the actual returns experienced by investors.
2. The Behind-the-Scenes Reason: Timing Is Crucial
Why does this happen? The fundamental issue is that the timing of investors’ purchases does not align with the timing of the fund’s performance.
- Funds Increase in Value, but Investors Lose Money: For example, Galaxy Value Growth A increased in value by 63% in the second half of last year, attracting nearly 10,000 new investors; in the first half of this year, it only increased by 3%, yet another 35,000 investors bought in (most of them at high prices). When the fund’s value later declined, these new investors suffered losses, resulting in a low profit percentage.
- Funds Decrease in Value, but Investors Make Money: For example, many investors in Ping An Value Youxiang A may have sold their shares during the previous period of growth (to lock in their profits), or some bought more shares at lower prices, effectively reducing their average cost. This is even more evident with closed-end funds, as investors cannot buy or sell them, so their profit percentage depends entirely on the fund’s performance (for example, Galaxy Zhiyuan Pension 2045, where all investors made a profit).
Tian Lihui from Nankai University explains: “The net value of a fund represents the price at a specific point in time, while your actual return is the weighted average of your returns over the period you held the fund. The difference between the two is the cost of your investment decisions.”
3. Multiple Factors Contributing to This Disconnection
This disconnect is not accidental and results from a combination of factors:
1. Sales Strategies: Financial channels tend to promote funds when they are performing well (for example, selling Galaxy Value Growth A aggressively when it was popular), leading investors to buy at high prices.
2. Short-Sighted Investing Behaviors: Investors tend to buy when prices are rising and sell when they are falling, missing out on long-term gains.
3. Industry Focus on Performance Over Experience: In the past, the industry primarily focused on fund net value rankings, without considering whether investors were actually making a profit, lacking ongoing support for investors.
4. The Value and Limitations of the New Metric
While this metric is useful:
- It forces the industry to shift its focus: From focusing on products to focusing on investors’ actual experiences.
- It provides investors with additional information: When choosing a fund, investors can see how many people have actually made a profit, helping them avoid poor investments.
It also has limitations:
- **It is a “rearview mirror”: It only reflects past performance and cannot predict the future.
- It does not show the amount of profit: For example, even if 90% of investors have made a profit, each may have only made a small amount, which cannot be distinguished from a few investors making large profits.
- Human behavior cannot be completely changed: The tendency to buy high and sell low is inherent; a single metric cannot completely overcome these behaviors, but it can serve as a reminder to investors to think carefully before making a decision.
5. Advice for Ordinary Investors
- Don’t Rely Only on Net Value: When choosing a fund, consider multiple factors such as the profit percentage, maximum drawdown, and holding period. Funds with a high profit percentage are more reliable.
- Avoid Impulsive Buying and Selling: Don’t buy a fund when it is very popular (like the additional 35,000 investors who bought into Galaxy Value Growth A at high prices), and don’t sell it immediately when its value drops. Long-term holding is key.
- View the Metric Critically: Use it as a reference, not as a definitive guide. The ability of the fund manager and the industry’s prospects are still important factors in making investment decisions.
In summary, this new metric makes investors’ profit situations more transparent. Although it does not solve all problems, it encourages the industry and investors to focus on the actual benefits investors receive from their investments. For ordinary investors, being more rational and less impulsive can help them make better investment decisions and potentially earn more money from their investments.