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21st Century Business Herald reporter Li Yuchen reports from Beijing

After the second quarter came to an end, the list of personal pension funds expanded again.

On the evening of July 12, the official website of the China Securities Regulatory Commission announced the latest version of the "List of Individual Pension Funds" as of June 30, 2024. Compared with 187 at the end of the first quarter, the number of individual pension funds in the market increased to 193 in the second quarter of this year.

It is observed that the newly approved Y shares all come from public offering institutions with the largest market size. Different from the previous approved list, in the second quarter, for the first time, some products were removed from the list due to liquidation.

In the context of the upward volatility of the equity market this year, a number of FOF funds have begun to recover. Wind data shows that as of July 15, more than half of the individual pension funds have achieved positive returns this year, but 70% of the products are still in the red since their establishment.

From the operation of pension FOF to the establishment of Y shares, the birth and survival of a personal pension fund is closely related to the fund manager's ability to maintain scale. Industry insiders pointed out that the important feature of the third pillar of pension is the residents' independent investment choice of pension products, and enhancing the attractiveness of personal pension funds often means that public fund managers still need to continue to build "long-term scenarios" for customers and seize returns from the market in more diversified forms.

The first time that the pension Y share was "delisted"

In terms of fund types, among the 7 funds that added Y shares in the second quarter of this year, there are 5 target date funds, such as GF Pension Target Date 2045 Three-Year (FOF), Hua Xia Pension Target Date 2060 Five-Year (FOF), etc., as well as 2 target risk funds, namely E Fund Huiyue Balanced Pension Target Three-Year (FOF) and Fuguo Xinhui Pension Target Date 2035 Three-Year (FOF).

Looking at the number of products under each fund management institution, E Fund has added two new personal pension funds to the list, while Hua Xia Fund, GF Fund, Fuwu Fund, China Europe Fund and CCB Fund have each added one.

According to the latest list, as of June 30, 2024, there are 14 public fund management institutions that manage more than 5 individual pension funds. Among them, China Asset Management and E Fund Management are tied for the top spot with 12 individual pension funds, followed by Southern Fund Management and GF Fund Management with 10, and China Europe and Jianxin Fund Management with 9.

Specifically, the reasons why the seven pension FOFs were approved to add Y shares are different. According to regulatory requirements, the establishment of Y shares by pension FOFs requires that the product scale must meet the requirements of not less than 50 million yuan at the end of the last four quarters, or not less than 200 million yuan at the end of the previous quarter. The reporter noticed that only the two funds under E Fund that added Y shares this time and one fund under Hua Xia had a scale of more than 200 million yuan at the end of the first quarter. The approval of the remaining individual pension funds was based on the continued stability of the scale of the main code products in the past year.

However, it is not easy for most pension FOFs to maintain a stable scale in the long term. One thing worth noting is that in the latest disclosed pension Y share list, there was also a "reduction" for the first time - Penghua Changle Stable Pension Target One-Year FOF was removed from the list because its net asset value had been below 50 million yuan for 60 consecutive working days in May this year.

Although five pension FOFs have been liquidated so far this year, this is the first time that a fund with Y shares has been liquidated. After the fund was removed, Penghua Fund still has three individual pension funds in the market.

According to relevant requirements, the net asset value of the sponsor-type fund must be higher than 200 million yuan three years after the contract comes into effect. After the three-year assessment period, the foundation, like ordinary funds, will be liquidated if the number of fund share holders is less than 200 for 60 consecutive working days or the net assets are less than 50 million yuan.

Looking back at the size trajectory of the fund, unlike some pension FOFs that were liquidated during the closed period this year, Penghua Changle Steady Pension Target One Year actually successfully survived the "three-year test". As of April 2022, the three-year closed period of Fund A shares expired, and the size of the fund remained at 228 million yuan. In November of the same year, the pension Y shares were successfully established. In the first quarter of 2023, the size of the fund even grew slightly.

However, since 2023, Penghua Changle Steady Retirement Target has failed to continue to "run steadily" for a year. Wind data shows that the fund manager changed after the closed period expired. From the second to the fourth quarter of 2023, Penghua Changle Steady Retirement Target fell by 6.14% in a year. Although it was slightly higher than the -6.67% return of the entire FOF market during the same period, it still encountered investors voting with their feet.

After liquidation, ordinary funds will transfer funds to the purchase payment account, but where will the money in the personal pension fund go? The reporter learned that because the Y share fund is a personal pension product, the redemption funds or allocated liquidation funds will be transferred to the personal pension fund account. When investors do not meet the conditions for receiving, such as the age for receiving basic pension, they cannot withdraw the amount directly to the bank account, but they can still purchase other personal pension products.

In addition, the CSRC also released the "List of Individual Pension Fund Sales Institutions" at the same time. Compared with the list at the end of the first quarter, the latest list of individual pension fund sales institutions has not changed, and still includes 19 commercial banks, 24 securities companies and 8 independent fund sales institutions.

Retain investors with "scenario" and "return"

With the rise of the volatility center of the equity market, the market performance of a number of FOFs has gradually shown signs of recovery.

Data shows that as of July 15, the average return rate of Y-share pension FOFs established in the entire market was -0.4% this year, and 105 funds had positive returns, accounting for more than half. In addition, there were 27 pension Y-share funds with a yield of more than 2%.

Among them, China Construction Bank's Five-Year Premium and Progressive Retirement Target Fund took the lead with an annual return of 7.8%. The Foresee Balanced Retirement Three-Year Fund and Foresee Retirement Target 2045 Three-Year Fund, both established in February this year under China Europe Fund, followed closely with yields of 5.55% and 5.45% respectively.

The five personal pension funds with the lowest returns are all managed by China Asset Management. All five funds are retirement target date funds, with target years ranging from 2035 to 2055, and their annual declines are all above 9%. Among them, China Asset Management's 11.9% loss in the five-year Y-year for retirement 2055 ranks last in the market.

However, from the perspective of establishment, more than 70% of individual pension funds have not yet recovered their capital. Since its establishment in 2022, only 50 individual pension funds have achieved positive returns, with the highest decline of more than 20%, most of which are retirement target date FOFs with target dates between 2040 and 2055.

Due to the limitation of returns, the size dilemma of individual pension fund Y shares still exists. The total size of 184 Y share funds with size data in Wind is 6.506 billion yuan, with an average size of only 35.36 million yuan, and only 17 funds with a size of more than 50 million yuan.

At the beginning of this year, Lin Xiaozheng, deputy director of the Institutional Department of the China Securities Regulatory Commission, said that in the next step, the CSRC will work with relevant ministries and commissions to carry out pilot evaluations, and at the same time urge fund managers to solidly improve the level of personal pension management and services. First, comprehensively strengthen the construction of core institutional investment and research capabilities; second, steadily launch more investment products that meet the needs of personal pensions; and third, continuously optimize investor services.

However, how to improve the attractiveness of personal pension products is always a big challenge for fund managers. In this regard, a pension business person from a large public fund in North China pointed out to reporters that in the scenario of market fluctuations, a necessary task of the institution is to provide "longer-term investment scenarios" for investors in personal pension funds.

“When customers buy personal pension funds, do they hold them for the three or five years of the closed period, or for the same period as the target date, 2030, 2035 or longer?” the source said. “In the long term, equity products have a stable center, and fund managers can better distribute returns. But in fact, many personal pension funds are mismatched with investors’ psychological deadlines, which leads to a lack of investment experience.”

On the one hand, it is necessary for managers and investors not to pay too much attention to performance rankings. On the other hand, as the awareness and mentality of pension investment need time to cultivate, managers can also "keep customers first" by optimizing investment strategies.

Therefore, from the perspective of product design, the above-mentioned person also suggested that institutions can also consider optimizing the risk reduction curve of pension funds to allow personal pension reserve goals to be more accurately aligned with market changes. For newly established products in a volatile market, even if their pension goals are relatively long-term, managers can still consider moderately reducing the risk asset allocation in the early stages of fund establishment to ensure holding comfort, thereby stimulating investors' enthusiasm for long-term holding.

A person from a leading fund company in South China pointed out to the reporter that diversified and decentralized investments can better provide investors with market returns. "I hope that the investment restrictions of pension FOF on QDII funds can be relaxed in the future. A wider range of international asset allocation can not only diversify investment risks, but also allow investors to enjoy the high returns of overseas assets, providing a more stable and lucrative return path for third-pillar pension investors."

Luo Zuanhui, chief non-bank analyst at Shenwan Hongyuan, pointed out that my country's personal pension system is becoming increasingly perfect, and the number of products and participating institutions are continuing to expand, but there is still much room for improvement in the size of funds and the efficiency of fund utilization, and there is potential for optimization in mechanism building, customer reach, business operations, product design, sales channels and other aspects.

"As personal pensions enter the full promotion period in the next stage, it is recommended to focus on the role of policy optimization, further enrichment of participating institutions and product shelves, and further improvement of channel construction in promoting business growth." Luo Zuanhui said.