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Star Making Story丨InvestmentfundLei MinLeaving office after five years of controversyHolding PeriodElderly CareFOFOnly one year

Text/Ren Hui

Public investmentElderly CarefundThe product is naturally aimed at retirement, but investors face three major problems: people are not old yet, the fund suffers huge losses and all the money is gone, the fund is too small and has to be liquidated, and the fund manager's performance is too poor and he "runs away".

On July 27, China Merchants FundLei MinThe most eye-catching thing is that they have cleared out all retirement target funds, including many three-year and five-year holding period retirement FOF funds that were established only one year ago, and there is still a long time before the first holding period expires.

When investors choose a fund, they are choosing a fund manager. Fund managers who are still in the holding period can leave midway, but investors cannot redeem midway. Such a rule is obviously unfair.

Publicly offered pension fund products have always been highly anticipated and defined as one of the "third pillars" of the pension financial system. It has been six years since the first batch of pension FOFs came on the market in 2018, but the operating conditions have been bumpy and have failed to win the trust of investors. The reasons behind this are worth thinking about.

Lei Min "clears out" all funds under management

Funds with a five-year holding period only manage one year

On July 27, China Merchants Fund announced that Lei Min had resigned from all managed funds, mainly including the following five products: China Merchants Le Yi and Hui Elderly Care Target Date 2035 Three-Year Holding Mixed Initiated FOF, China Merchants He Hui Elderly Care Target Date 2045 Five-Year Holding Period Mixed Initiated (FOF), China Merchants Zhi'an Stable Allocation One-Year Holding Period Mixed (FOF), China Merchants Hexiang Balanced Elderly Care Three-Year Holding Period Mixed (FOF), and China Merchants Zhixing Stable Allocation Mixed (FOF-LOF).

The announcement shows that fund manager Lei Min will resign on July 27, 2024 due to work arrangements and transfer to other positions in the company.

Compared with Qiu Dongrong of Zhonggeng Fund, Lei Min's resignation is more "standardized". About a month ago, the funds under his management successively hired new fund managers. Careful investors could probably sense at this time that the fund managers had the intention to leave.

Lei Min's resignation is also controversial. In the past two years, many FOF funds with longer holding periods have been issued, but as of now, most of them have only been established for more than one year, and there is still a long time before the first holding period expires.

For example, the China Merchants Hehui Pension 2045 Five-Year Holding Mixed Initiated Fund (FOF) was established on March 7, 2023. As of now, it has been less than a year and a half since its establishment, and there are still three and a half years before the expiration of the first five-year holding period.

China Merchants Hexiang Balanced Retirement Three-Year Holding Period Mixed (FOF) and Shangle Yihehui Retirement Target Date 2035 Three-Year Holding Mixed Initiated (FOF) were established on May 17, 2023. As of now, they have only been established for 1 year and 72 days, and there are still 2 years before the expiration of the first three-year holding period.

It is worth mentioning that when issuing the China Merchants Hehui Pension 2045 Five-Year Holding Mixed Initiated Fund (FOF), Lei Min emphasized that the product has three notable features: 1) For a target date fund for retirement in 2045, equity assets will gradually decline as the holder's retirement date approaches; 2) For a long-term pension FOF with a five-year holding period, it truly uses long-term thinking and methods to invest, avoiding investors' blind pursuit of short-term gains and losses; 3) For an initiated fund, China Merchants Foundation will subscribe for no less than 10 million yuan.

These three characteristics have also become the "complaint points" of the product. First, the equity market has performed poorly in the past two years. China Merchants and Hui Pension 2045 five-year holding mixed-initiated fund (FOF) suffered a large loss due to the allocation of a large proportion of equity assets. As for the "long-term pension FOF with a five-year holding period, which truly uses long-term thinking and methods to invest", the fund manager resigned one year after the product was issued. Looking back, it is very ironic.

In order to guide investors to make long-term investments, fund companies have developed closed-term funds and holding-period funds on the basis of ensuring some liquidity, which helps investors to control their hands to a certain extent.

From the perspective of concepts and product attribution, closed-end funds and holding period funds are different, but very similar, both have a lock-up period, during which holders cannot redeem. This also causes certain drawbacks for these two types of funds. When investors choose a fund, they are choosing a fund manager. A fund manager who is still in the lock-up period can leave midway, but investors cannot redeem midway. Such a rule is obviously unfair.

At the end of last year, the China Securities Investment Fund Association revised and issued the "Fund Practitioner Management Rules" and supporting rules and the "Securities and Futures Institutions Investment Manager Registration Rules". The documents made detailed revisions to issues such as the qualification management of practitioners, the management responsibilities of fund industry institutions, and professional conduct norms. In particular, they further restricted the resignation of fund managers, with a clear intention to protect the interests of investors.

China Merchants Fund lacks talent

70% of FOF funds suffer losses

According to information, Lei Min has been engaged in FOF investment for a long time. He has worked in the Equity Investment Department of Pacific Asset Management Co., Ltd. and the Equity Investment Department of China Life Asset Management Co., Ltd. In December 2021, he joined the Asset Allocation and FOF Investment Department of China Merchants Fund.

Lei Min did not work at China Merchants Fund for a long time, but the performance of the several funds she managed individually ranked above average among similar products. Her departure is also a big loss for China Merchants Fund, which already lacks FOF talents.

At present, China Merchants Fund has a total of 17 FOF funds of various types, of which 12 are in a loss-making state, accounting for more than 70%. Of the 11 FOFs with retirement goals, 8 are in a loss-making state, also accounting for more than 70%.

Among them, China Merchants Shengxin Preferred 3-Month Holding Period Mixed (FOF) A has accumulated a loss of 27.39% since its establishment, and China Merchants Hehui Elderly Care 2045 Five-Year Holding Mixed Initiated (FOF), for which Lei Min has just resigned, has accumulated a loss of 13.56% since its establishment.

Yu Liyong is the most experienced among the current FOF fund managers of China Merchants Fund. He worked at PICC Asset Management Co., Ltd. from August 2004 to March 2022, and served as General Manager of Equity Research and Investment Department and General Manager of Fund Investment Department, General Manager of Equity Investment Department, etc. He joined China Merchants Fund Management Co., Ltd. in March 2022 and is currently the Chief Allocation Officer and Head of Investment Management Department 4. However, the FOF with the largest loss in China Merchants Fund was created by Liyong.