Summary of Key Points
This article focuses on bank-affiliated fund companies and covers several key points: First, although the scale of bank-affiliated funds increased to 7.06 trillion yuan in the second quarter, their share of the entire public offering industry has decreased from one-quarter in 2019 to less than one-fifth. Second, bank-affiliated funds such as Yongying and BOCOM Schroder in Shanghai have been the main drivers of growth, while BOCOM Fund has fallen significantly behind in active equity investments. Third, the stereotype that bank-affiliated funds prioritize fixed income over equities is partly true but not entirely accurate; some banks (such as BOCOM and ICBC) perform well in equities, although their large fixed income base makes their equity performance appear weaker. Fourth, BOCOM Fund once had a strong foundation in equities but has now lost its way, potentially being surpassed by Yongying Fund, which is controlled by a smaller shareholder.
1. Increased Scale, but Declining Industry Presence
The scale of bank-affiliated funds increased to 7.06 trillion yuan in the second quarter, indicating growth. However, the total size of the public offering industry has reached 39.67 trillion yuan, meaning that bank-affiliated funds now account for less than one-fifth of the market. This decline reflects the faster overall growth of the industry, with bank-affiliated funds failing to keep up. Although several bank-affiliated firms in Shanghai (Yongying, BOCOM Schroder, and Industrial Bank) have seen significant increases, their smaller growth relative to other non-bank funds has led to a decrease in their overall market share.
2. The Stereotype of “Focusing on Fixed Income over Equities”
The common belief that bank-affiliated funds prefer fixed income (such as bonds and money markets) over equities is not unfounded:
- Management Structure: Banks use a top-down hierarchical management approach, whereas equity funds require flexible decision-making (for example, fund managers need to quickly adjust stock positions). This structure is less suitable for responding to market changes.
- Incentive Issues: The incentive mechanisms in bank-affiliated firms are relatively conservative, making it difficult to attract outstanding equity fund managers.
However, not all bank-affiliated funds follow this pattern. BOCOM Schroder has always focused on equities since its establishment, and ICBC Credit Suisse has also been a leader in this area over the past decade. Why does the stereotype persist? It is because bank-affiliated firms hold a large portion of their assets in fixed income (often taking on low-risk funds from banking channels), which results in a higher fixed income ratio and makes their equity performance appear weaker compared to companies like E Fund, which specialize more in equities.
3. BOCOM Fund: From a Leader to a Laggard?
BOCOM Fund is a established firm (founded in 2004, earlier than ICBC and CCB). It had a strong start in equities:
- Products like BOCOM China and BOCOM Income won many awards, and the scale of one of its funds in 2007 was equivalent to the current total size of its active equity portfolio (13.6 billion yuan).
- However, it now ranks 9th among 15 bank-affiliated firms in terms of active equity assets, and its fund managers have not outperformed benchmarks since 2020.
Some argue that a smaller scale may lead to less losses, but for an established firm like BOCOM Fund, this performance is quite disappointing. Active equity investments are like “rowing against the current”; without progress, one risks falling behind.
4. The Dilemma of Bank Affiliation: Having Resources Does Not Necessarily Mean Success
While bank-affiliated funds have a significant advantage in accessing banking channels and facing less competitive pressure, this can also lead to a loss of direction:
- BOCOM Fund’s net profit exceeded one billion yuan ten years ago but has failed to find new growth targets (such as aiming for a place in the global asset management rankings like E Fund or ICBC Credit Suisse).
- In contrast, Yongying Fund, controlled by Ningbo Bank (with a shareholder net profit ten times smaller than that of China Bank), has grown rapidly over the past decade and could potentially surpass BOCOM Fund’s net profit by 2026.
This shows that having resources does not guarantee success; market-driven motivation and a clear direction are crucial.
5. The Challenges of Active Equity Investments
The article highlights the unique challenges of active equity investments:
- Unlike fixed income, where products have limited differences and can be easily managed by third parties, equity funds require distinctiveness, making it difficult to push underperforming products through strong distribution channels.
- It is common for former leaders in active equity investments to fall out of the top tier after a few years of success. BOCOM Fund’s decline reflects its failure to maintain its competitive edge in this area.
In summary, bank-affiliated funds need to break free from the stereotype that they focus on fixed income and make persistent efforts in equities. The example of BOCOM Fund serves as a reminder that even with a good starting point, failing to adapt to market changes can lead to being surpassed by competitors.