Summary of Key Points
This year, new regulations issued by the China Securities Regulatory Commission (CSRC) require that active equity and hybrid funds that have been established for at least one year must disclose in their semi-annual or annual reports the "proportion of investors who made a profit in the past year." This metric highlights the issue of funds generating profits while investors may not be benefiting. Analysis of the initial data reveals that whether investors make a profit is not only related to the net asset value (NAV) of the fund but also closely associated with the timing of their purchases. Funds with purchase restrictions and clear investment styles generally have higher profit ratios for investors. This indicator could potentially force fund companies to shift from focusing solely on performance to paying more attention to the actual investment experience of their investors.
1. What is this new indicator? For once, someone is really addressing the question of whether investors are making a profit
Previously, funds only reported their "NAV growth rate" (for example, a 20% increase this year), but this does not reflect the actual returns for investors. You might have bought the fund at its peak, and even if it has appreciated, you could still have lost money. The new indicator directly shows the proportion of people who bought the fund in the past year who actually made a profit. For instance, if a fund's NAV increased by 10% but 80% of the purchases occurred in the last month, the profit ratio might only be 20%. This indicator brings the actual profit and loss situation for investors to the forefront, preventing fund companies from hiding behind impressive NAV figures.
2. Fund profits do not equal investor profits: The missing link is the timing of purchases
A key concept in the report is: **Investor returns = Fund returns + Behavioral gains/losses.* What does this mean?
- Fund returns: This refers to the increase in the fund's NAV (for example, a 15% increase).
- Behavioral gains/losses: These are the additional profits or losses resulting from the timing of your purchases. For example, if you buy a fund after it has risen by 15% and then it falls by 5%, your behavioral loss would be -5%, resulting in a total return of only 10%. To put it more plainly: If a fund increases by 20% in a year, but you buy it at its highest point (18%) and then sell it when it drops to 15%, you have actually lost 3%.
For example, the Tongtai Huiying fund had a 18.59% NAV increase in the past year (the fund made a profit), but only 25.94% of investors were profitable, mainly because many bought it at the peak and were trapped in the subsequent decline.
3. Which funds have higher investor profit ratios? Purchase restrictions and clear investment styles are the keys
The initial data highlights two types of funds with particularly high profit ratios:
1. Funds with long-term purchase restrictions: Such as Ruiyuan Growth Value (managed by Fu Pengbo), Zhonggeng Small Cap Value, and Xingquan Trend. These funds limit large-scale purchases, preventing new investors from buying at high prices during market peaks. For example, Ruiyuan Growth Value's NAV increased by 114.95%, but its profit ratio was 99.68% because investors entered the fund gradually and did not buy at the peak.
2. Funds with clear investment styles: For instance, Nuoan Growth (focusing on technology stocks) and Yongying Technology Smart Selection (technology-themed). Investors know what type of fund they are investing in and are less likely to panic and sell due to short-term fluctuations. Yongying Technology Smart Selection's NAV increased by 276%, and its profit ratio was 99.52% because investors understood its investment style and were able to hold onto their investments.
On the other hand, even well-known funds like Zhang Kun's E Fund Blue Chips did not perform well, with a 13% NAV decrease and a profit ratio of only 22.74% because many bought it when it was at its highest point and are still holding losses.
4. Can this indicator help us choose funds? Don't use it as a one-size-fits-all guide
The report warns that this indicator should not be used directly to select funds. Why?
- Cyclical factors play a role: A good market in the past year can lead to high profit ratios for many funds, but these ratios can drop significantly in a poor market (for example, Zhang Kun's fund might have had a profit ratio of over 90% five years ago).
- It only reflects the past year: This indicator does not predict future returns; it only shows how many people who bought the fund in the past year made a profit.
However, it can have a significant impact on the industry. Fund companies will now be more focused on whether investors are making a profit, which may lead to changes such as implementing purchase restrictions, providing investor education, and clarifying investment styles. In the future, fund companies might actively help investors make better purchase decisions, rather than just selling funds without considering their long-term outcomes.
5. In conclusion: This indicator is both a mirror and a compass
This new indicator reveals the truth about whether funds are profitable and whether investors are benefiting. It also highlights which fund companies are truly considering the needs of their investors. For individual investors, it reminds us that when choosing a fund, we should not just look at its recent performance but also consider when we bought it and whether we can hold onto it. For fund companies, it may drive the industry to shift from focusing on performance to focusing on providing a good investment experience. After all, only when investors truly make a profit will they continue to hold their investments, allowing fund companies to thrive in the long term.
In summary, when buying funds, we should not only look at the NAV but also consider the proportion of investors who have actually made a profit. While this indicator is useful, it is not a magic solution, and ultimately, we should still make decisions based on our investment horizon and risk tolerance.