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"The state of war is ever-changing, and the shape of water is ever-changing" is often used to describe not sticking to conventions and being flexible and maneuverable.

The same is true in investment. A strategy or a model may be more effective at a certain stage, but as the market continues to change, strategies and models also need to be constantly iterated and improved.

The fixed income team of Huafu Fund also understands this well. When the original concepts and frameworks encountered some challenges in the past two years, they responded quickly, actively made adjustments, and iterated and optimized in a way that was more suitable for the market, and achieved good results.

Many low-volatility or medium-low-volatility bond funds under Huafu Fund have performed well this year. As of July 5, 2024, the Class A shares of Huafu Anying One-Year Holding Bond and Huafu Anye One-Year Holding Bond funds have achieved returns of 4.22% and 3.01% respectively this year, and the benchmark yields for the same period were both 2.48%.

As the team leader, Yin Peijun, deputy general manager and director of fixed income department of Huafu Fund, recently emphasized that investment requires respect for the market and no framework is immutable. "The wise change with the times, and the knowledgeable make decisions based on circumstances. Only by actively recognizing, responding to, and seeking change can investment be done with ease."

The evolution of fixed income strategies:

Style positioning + position management + risk budget

Investors familiar with Huafu Fund may find that in recent years, many of the team's fixed income products have performed more steadily and their drawdowns have been relatively better controlled.

This is mainly due to some adjustments made by Huafu Fund to its fixed income strategy, starting with the change in investment philosophy and investment framework. Yin Peijun, director of Huafu Fund's fixed income department, said frankly: "In the past, we may have believed more in mean reversion, evaluated the market from a cyclical perspective, and were more top-down, emphasizing counter-trend layout and grasping the turning points of major asset classes."

"Although the winning rate has been relatively high in the past, these concepts and frameworks have been challenged due to the complex and changing market environment in the past two years. We now hope that the style of our products can be clearer and more refined, and that we can operate our products through multiple strategies to match different market demands. This is different from what we did before," Yin Peijun further stated.

In terms of specific operations, we first conduct style positioning based on different products, and then use strategies similar to CPPI to manage positions, which are embedded in the original ideas and framework of major asset allocation.

For example, among the products positioned as low-volatility style, Huafu Rongsheng One-Year Holding Period Mixed is a fixed income + double-low convertible bond enhancement strategy, with a return rate of 3.02% since its establishment (2023/7/28) (the benchmark increased by 0.13% during the same period); and Huafu Anye One-Year Holding Bond is a product based on the risk parity strategy; Huafu Yield Enhanced Bond is an investment strategy that focuses on the double-low strategy and value-type convertible bonds, supplemented by a low-position value stock.

Among the products positioned as medium-to-low volatility style, Huafu Anying One-Year Holding Period Bond is a product based on pure fixed income bonds, and is mainly composed of double-low convertible bonds + value stocks; and among the medium-to-low volatility fixed income + products, Huafu Enhanced Returns uses fixed income + convertible bonds multi-strategy + growth balance as its strategy.

"Overall, our major change is to optimize product strategies based on position management and risk budgeting. Judging from the results this year, the overall results of these products are pretty good, with relatively stable returns and relatively good drawdown control," Yin Peijun continued.

Investment and Research Division

Each has its own strengths and integrates with each other

In order to achieve these strategic goals, Huafu Fund further refined the division of labor and cooperation among the investment and research teams, and strengthened the construction of an integrated, multi-strategy investment and research system.

It is understood that there are a total of 7 fund managers in the fixed income team of Huafu Fund, assisted by the director of the bond research department and several researchers. The team has a clear division of labor, and the research scope covers interest rate bonds, credit bonds, convertible bonds, macroeconomics, overseas and other fields.

In addition to cultivating their respective areas of expertise, it is also important for each team member to expand their circle of competence and collaborate with the team. In Yin Peijun's view, "Fixed income + products involve multi-asset investment, so fund managers need to understand their own circle of competence and gradually expand it. It is best if there are no particularly obvious shortcomings in investment capabilities."

"We usually hold regular meetings to discuss and communicate about different products and asset categories. For example, in addition to the fund manager himself, the equity research department will also provide corresponding support for stocks. The major asset allocation researchers will make some suggestions on the overall portfolio allocation direction, which makes the overall investment research cooperation relatively close." Yin Peijun further said.

In addition, Yin Peijun also pointed out: "Huafu fixed income brand, especially in the field of 'fixed income +', has been able to have a certain degree of popularity in the market for many years, which is inseparable from the advantage of inheritance. Huafu Fund has always attached importance to echelon construction and personnel training, and has never stopped. At present, the fund managers in the team are almost all outstanding talents independently trained by the company, including compound players with multiple experiences in bond trading, research, and investment."

The bond market still has a winning rate

Looking at the whole year, the dividend strategy is still worth paying attention to

As the "first half" of 2024 comes to an end, looking ahead to the second half of the market, Yin Peijun believes: "The overall real interest rate is still high, which means that the bond market still has a chance of winning, even though many data show that the odds of the bond market are falling."

As for the stock market, Yin Peijun believes that after the stock adjustment, many growth styles, including some core assets, are not expensive at present, but the key lies in whether the market risk appetite improves. At present, equity assets may still be more structural opportunities.

"Specifically in terms of sectors, high dividend sectors may still dominate in the second half of the year. With strong policy support and promotion, the performance of the technology growth sector in the second half of the year may also be worthy of attention." Yin Peijun continued.

In addition, Yin Peijun believes that "investment in the second half of the year should pay close attention to overseas variables. If the Fed can start to cut interest rates quickly, it is expected to benefit growth-style assets, but at present, the pace of the Fed's interest rate cut is still uncertain."

"In addition, for the domestic macro-economy, the new 517 real estate policy is quite powerful, and has made corresponding policy adjustments on the demand side, supply side, and interest rate policy. We will closely observe the policy effects on the macro-economy in the future." Yin Peijun said.

Risk Warning: Funds/stock markets are risky, so be cautious when investing. The discussion in this article on the securities market, Huafu fixed income team, and Huafu fixed income products is only the company's research view on the current securities market and related industries. Based on the uncertainty and variability of the market environment, the views involved may be adjusted or changed with the market in the future. This content is only for the purpose of communication with investors, and does not constitute advice or opinions on any institutional or individual investment, does not represent the current or future holdings of the funds managed by the company, and does not necessarily serve as the basis for investment decisions of the funds managed by the company, and does not constitute a commitment or guarantee of investment returns for investors. Before purchasing a fund, investors should carefully read the fund legal documents such as the "Fund Contract", "Recruitment Instructions", and "Product Information Summary" to understand the risk-return characteristics of the fund, and judge whether the fund is suitable for the investor's risk tolerance based on their own investment objectives, investment period, investment experience, asset status, etc. Investors should participate in fund/stock market investment prudently based on their personal risk tolerance and investment experience.

Huafu Anying One-Year Holding Period Bond Fund is a bond fund. The investment ratio of bond assets shall not be less than 80% of the fund assets, and the investment ratio of equity assets such as stocks shall not exceed 20% of the fund assets (of which the investment ratio of Hong Kong Stock Connect investment target stocks accounts for 0%-50% of the stock assets). Huafu Anying faces unique risks brought about by differences in investment environment, investment targets, market system and trading rules under the Hong Kong Stock Connect trading mechanism. Huafu Anying sets a minimum holding period of one year for each fund share. Before the expiration date of the minimum holding period (excluding that day), investors cannot apply for redemption. From the expiration date of the minimum holding period (including that day), investors can apply for redemption. Investors will face the risk of not being able to redeem during the holding period. The fund manager's risk rating for Huafu Anying is R2, which is suitable for investors with a risk tolerance level of C2 and above.

Huafu Anye One-Year Holding Period Bond Fund is a bond fund. The investment ratio of bond assets shall not be less than 80% of the fund assets, and the investment ratio of equity assets such as stocks shall not exceed 20% of the fund assets (of which the investment ratio of Hong Kong Stock Connect investment target stocks accounts for 0%-50% of the stock assets). Huafu Anye faces unique risks brought about by differences in investment environment, investment targets, market system and trading rules under the Hong Kong Stock Connect trading mechanism. Huafu Anye sets a minimum holding period of one year for each fund share. Before the expiration date of the minimum holding period (excluding that day), investors cannot apply for redemption. From the expiration date of the minimum holding period (including that day), investors can apply for redemption. Investors will face the risk of not being able to redeem during the holding period. The fund manager's risk rating for Huafu Anye is R2, which is suitable for investors with a risk tolerance level of C2 and above.

Huafu Enhanced Return Bond Fund is a bond fund, and the proportion of investment in fixed income securities is not less than 80% of the fund assets. The fund manager has rated the risk of Huafu Enhanced Return Bond Fund as R2, which is suitable for investors with a risk tolerance level of C2 and above. Huafu Enhanced Return is a LOF fund. After the fund units are listed for trading, there may be a deviation between the transaction price and the net value of the fund units, that is, there is a risk of premium trading or discount trading. After the fund units are listed for trading, the scale may be small or the trading volume may be insufficient, resulting in the risk that investors cannot sell quickly, sell at low cost, or buy.

Huafu Yield Enhanced Bond Fund is a bond fund, and the proportion of bond investment in the investment portfolio is not less than 80% of the fund assets. The fund manager has rated the risk of Huafu Yield Enhanced Bond Fund as R2, which is suitable for investors with risk tolerance level of C2 and above.

Huafu Rongsheng One-Year Holding Period Hybrid Fund is a hybrid fund. The proportion of investment in stock assets, convertible bonds (including detachable convertible bonds) and exchangeable bonds accounts for 10%-30% of the fund assets. The proportion of investment in Hong Kong Stock Connect target stocks does not exceed 50% of the stock assets; the proportion of investment in interbank certificates of deposit does not exceed 20% of the fund assets. Huafu Rongsheng faces unique risks brought about by differences in investment environment, investment targets, market systems and trading rules under the Hong Kong Stock Connect trading mechanism. Huafu Rongsheng sets a minimum holding period of one year for each fund share. Before the expiration date of the minimum holding period (excluding that day), investors cannot apply for redemption. From the expiration date of the minimum holding period (including that day), investors can apply for redemption. Investors will face the risk of not being able to redeem during the holding period. The fund manager's risk rating for Huafu Rongsheng is R3, which is suitable for investors with a risk tolerance level of C3 and above.

For the specific risks of the above funds, please refer to the relevant sections of the "Prospectus". The investment income of the fund will fluctuate due to adjustments in the securities market, and principal losses may occur. Investors should note that different fund sales institutions may have different risk ratings for this fund. Please purchase according to the risk assessment and matching results made by each sales institution, and read the legal documents such as the "Fund Contract", "Prospectus", "Product Information Summary" and other legal documents of the above funds in detail to understand the specific circumstances such as the risk and return characteristics of the above funds, and make investment choices based on your own risk tolerance and other circumstances. The past performance of the fund does not indicate its future performance, and the performance of other funds managed by the fund manager does not constitute a guarantee of the fund's performance. The fund manager promises to manage and use the fund assets in accordance with the principles of honesty, trustworthiness, diligence and due diligence, but does not guarantee that the fund will make a profit or a minimum return. The operation time of funds in my country is relatively short and cannot reflect all stages of stock market development. The fund manager reminds investors of the "buyer beware" principle. After making an investment decision, the risks related to fund investment shall be borne by the investors themselves.

Yin Peijun has 19 years of experience in securities industry, including 10 years of experience in fund management. He joined Huafu Fund Management Co., Ltd. in 2012 and is currently the fund manager of Huafu Enhanced Return Bond Fund (since March 6, 2014), Huafu Anxiang Bond Fund (since January 30, 2018), Huafu Yield Enhanced Bond Fund (since August 28, 2018), Huafu Anhua Bond Fund (since January 28, 2021), Huafu Anying One-Year Holding Period Bond Fund (since August 26, 2021), Huafu Jifeng 60-Day Rolling Holding Period Medium and Short-Term Bond Fund (since November 8, 2021), Huafu Anye One-Year Holding Period Bond Fund (since June 6, 2022), and Huafu Rongsheng One-Year Holding Period Mixed Fund (since July 28, 2023).

Huafu Enhanced Return (established on September 8, 2010), whose benchmark is the CSI All Bond Index yield, has past performance returns/benchmarks for the same period as follows: 11.94%/4.96% in 2019, 9.4%/3.05% in 2020, 9.94%/5.65% in 2021, -1.46%/3.49% in 2022, and -0.41%/5.23% in 2023.

Huafu Anxiang (established on January 21, 2016): The benchmark is the CSI All Bond Index yield. On January 30, 2018, it was transformed from a principal-guaranteed hybrid fund to a bond fund. The benchmark before the transformation was the two-year bank time deposit yield (after tax). Past performance returns/benchmarks for the same period are as follows: 19.44%/4.96% in 2019, 12.88%/3.05% in 2020, 18.59%/5.65% in 2021, -7.32%/3.49% in 2022, and -4.83%/5.23% in 2023.

Huafu Income Enhancement (established on May 28, 2008), the benchmark is the CSI All Bond Index yield. The past performance returns/benchmarks for the same period are as follows: A and B shares were 7.41% and 6.98%/4.96% in 2019, 5.72% and 5.3%/3.05% in 2020, 8.83% and 8.39%/5.65% in 2021, -0.92% and -1.31%/3.49% in 2022, and 0.02% and -0.38%/5.23% in 2023.

Huafu Anhua (established on January 28, 2021), the benchmark is the yield of the China Bond Composite Index × 90% + the yield of the Shanghai and Shenzhen 300 Index × 10%. The past performance returns/benchmarks for the same period are as follows: in 2021 (from the effectiveness of the contract), A and C shares were 8.85%, 8.45%/0.77%, in 2022, A and C shares were -3.33%, -3.73%/-1.78%, in 2023, A and C shares were -3.18%, -3.56%/0.71%.

Huafu Anying One-Year Holding Period Bond Fund (established on August 26, 2021) has a benchmark of China Bond Composite Full Price Index yield × 90% + CSI 300 Index yield × 5% + Hang Seng Index yield (adjusted using valuation exchange rate) × 5%. The past performance returns/benchmarks for the same period are as follows: As of the end of 2021, the fund had been established for less than six months and its performance was not displayed. In 2022, the A and C shares were -4.40%, -4.78%/-0.85%, and in 2023, the A and C shares were -4.32%, -4.70%/0.71%.

Huafu Jifeng 60-day rolling holding medium- and short-term bond fund (established on November 8, 2021) is based on the China Bond Comprehensive Full Price (1-3 years) index yield × 80% + one-year time deposit benchmark rate (after tax) × 20%. The past performance returns/benchmarks for the same period are as follows: As of the end of 2021, the fund had been established for less than six months and its performance was not displayed. In 2022, the A and C shares were 4.54% and 4.24%/-0.18%, and in 2023, the A and C shares were 4.44% and 4.23%/0.76%.

Huafu Anye One-Year Holding Period Bond Fund (established on June 6, 2022), the benchmark is the China Bond Comprehensive Full Price Index Yield × 90% + Shanghai and Shenzhen 300 Index Yield × 5% + Hang Seng Index Yield (adjusted using valuation exchange rate) × 5%. The past performance returns/benchmarks for the same period are as follows: 2022 A and C shares (from the effective date of the contract) -1.15%, -1.37%/-0.27%, 2023 A and C shares -1.22%, -1.62%/0.71%. (The above data comes from the fund's regular report)

Huafu Rongsheng One-Year Holding Period Mixed Fund (established on July 28, 2023) is based on the China Bond Composite Full Price Index yield × 80% + CSI 300 Index yield × 15% + Hang Seng Index yield (adjusted using valuation exchange rate) × 5%. As of the end of 2023, the fund has been established for less than six months and its performance is not displayed.

Funds may face various risks during the investment operation, including market risks, management risks, technical risks and compliance risks of the fund itself. Large-scale redemption risk is a risk unique to open-end funds, that is, when the net redemption application of the fund on a single open day exceeds a certain proportion of the total fund shares (10% for open-end funds, 20% for periodic open funds, and excluding special products specified by the China Securities Regulatory Commission), you may not be able to redeem all the fund shares you applied for in time, or the amount you redeemed may be delayed. You should fully understand the difference between regular and fixed-amount fund investment and savings methods such as zero-deposit and lump-sum withdrawal. Regular and fixed-amount investment is a simple and easy investment method to guide investors to make long-term investments and average investment costs, but it cannot avoid the risks inherent in fund investment, cannot guarantee investors' returns, and is not an equivalent financial management method to replace savings.

（CIS）

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