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Text/Liu Zhentao

There have been changes in the senior management of Cathay Fund, and a new general manager has arrived.

On July 25, Guotai Fund issued an announcement on senior management changes. Li Sheng was appointed as the new general manager of Guotai Fund, and his term of office will start from July 24, 2024. The company's chairman Zhou Xiangyong will no longer serve as acting general manager.

Public information shows that Li Sheng joined Cathay Fund in July this year. He had previously worked in the China Construction Bank Head Office, China Construction Investment, and China Construction Investment Hong Kong Company, and has rich experience in the financial industry.

Before Li Sheng took office as the general manager of Guotai Fund, the position of general manager of the company was taken over by the chairman Zhou Xiangyong. Zhou Xiangyong is a veteran of Guotai Fund. In July 2016, Zhou Xiangyong took over as the general manager of Guotai Fund. On March 26, 2024, Guotai Fund announced that due to work arrangements, Zhou Xiangyong was promoted to the chairman of the company and left the position of general manager. Since there was no suitable candidate, Zhou Xiangyong would temporarily take over.

Four months after Zhou Xiangyong took over as acting general manager, Li Sheng joined Guotai Fund and was appointed as the new general manager. From the current situation, the two core executives of Guotai Fund, the chairman and the general manager, are already in place.

According to information, Guotai Fund was established on March 5, 1998, 26 years ago. It is one of the "old ten" in the public offering market and the first public fund management company established in my country.

In terms of scale, Wind data shows that as of the end of June 30, 2024, the scale of public fund management of Guotai Fund was 655.629 billion yuan, ranking 7th among the "old ten" and 15th in the public fund market, making it a leading public fund company.

The previous general manager Zhou Xiangyong played an indispensable role in the development of Guotai Fund's public offering scale. Zhou Xiangyong was appointed as the general manager of Guotai Fund in July 2017. Before Zhou Xiangyong took office, at the end of June 30, 2017, Guotai Fund's public offering management scale was 98.203 billion yuan, less than 100 billion yuan.

After Zhou Xiangyong took office as general manager, the scale of Guotai Fund increased significantly. Wind data shows that Zhou Xiangyong took office as general manager for nearly one and a half years. At the end of 2018, Guotai Fund's public fund management scale exceeded 200 billion yuan. As of the end of June 30, 2024, Guotai Fund's public fund management scale exceeded 650 billion yuan. As of his resignation as general manager, during Zhou Xiangyong's tenure, Guotai Fund's public fund management scale increased by 5 times.

However, observing the product scale structure of Cathay Fund, although the total scale of Cathay Fund's public offerings has increased, there is also a phenomenon of imbalance. Fixed income products account for a large proportion, while equity products account for a small proportion. In the past two years, the scale of equity products has declined significantly, and the scale relies on fixed income products to support it.

Wind data shows that as of the end of June 30, 2024, the scale of Guotai Fund's equity products was 112.891 billion yuan, the scale of mixed products was 26.449 billion yuan, the scale of bond products was 180.230 billion yuan, and the scale of money products was 314.589 billion yuan.

At the end of the second quarter of 2024, the scale of Guotai Fund's equity products (stock and mixed types) was 139.34 billion yuan, accounting for 21.25% of the total scale; the scale of Guotai Fund's fixed income products (bond and money types) was 494.819 billion yuan, accounting for 75.47% of the total scale.

Judging from the situation in the past two years, Wind data shows that from the end of the second quarter of 2023 to the end of the second quarter of 2024, the scale of Guotai Fund's stock products decreased from 145.436 billion yuan to 112.891 billion yuan, a decrease of 32.545 billion yuan; the scale of mixed products decreased from 39.818 billion yuan to 26.449 billion yuan, a decrease of 13.369 billion yuan; the scale of bond products increased from 130.372 billion yuan to 180.230 billion yuan, an increase of 49.858 billion yuan; the scale of money products increased from 298.234 billion yuan to 314.589 billion yuan, an increase of 16.355 billion yuan.

The growth of bond and money products made up for the decline in stock and hybrid products. Guotai Fund relied on the advantages of fixed-income products to achieve stable growth in scale.

The scale of equity products accounts for a relatively small proportion. When the scale of equity products decreases, it will have a certain impact on the revenue of public fund companies.

The main source of income for public funds is management fees. From the perspective of management fees, the management fee rate for general fixed-income products is 0.6%-0.8%; the management fee rate for equity products is 1.2%-1.5%. In recent years, public fund companies have responded to the fee reduction policy and lowered relevant fees. The management fee for equity funds has been reduced to no more than 1.2%, and the management fee for most fixed-income funds has also been reduced to around 0.3%. Even with the reduction in fees, the management fee rate charged for equity products is still higher than that for fixed-income products.

Therefore, for mutual fund companies of the same size, if the equity products account for a larger proportion, they may charge more management fees, which will bring higher operating income. There are even cases where the operating income of a small mutual fund company is higher than that of a large mutual fund company.

Wind data shows that in 2023, Guotai Fund achieved operating income of 3.359 billion yuan, and Invesco Great Wall Fund achieved operating income of 3.830 billion yuan. In terms of scale, at the end of 2023, Guotai Fund's scale was 590.73 billion yuan, and Invesco Great Wall Fund's scale was 513.824 billion yuan.

The scale of Guotai Fund's public offering is much higher than that of Invesco Great Wall Fund, but its operating income is lower than that of Invesco Great Wall Fund. The reason is that the scale of equity products of Invesco Great Wall Fund accounts for a relatively high proportion. According to Wind data statistics, at the end of 2023, the scale of equity products (stock and hybrid) of Invesco Great Wall Fund accounted for 35.98%, while the scale of equity products (stock and hybrid) of Guotai Fund accounted for 27.30%.

Overall, Cathay Fund's advantage lies in the fixed income field. It has achieved growth in total management scale by relying on the growth in the scale of fixed income products. However, the product scale structure is unbalanced, with equity products accounting for a small proportion and showing a downward trend in recent years.

This year, the "New Nine Articles" issued by the regulatory authorities clearly pointed out that we should vigorously develop equity public funds and significantly increase the proportion of equity funds. From this point of view, Guotai Fund needs to vigorously promote the development of equity products while maintaining its fixed income product advantages.

At present, the new general manager of Guotai Fund has taken office, and the company's new core management has successfully completed the handover. Can the combination of Zhou Xiangyong and Li Sheng lead Guotai Fund to increase the scale of equity products and achieve new development? Time will tell!