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In the first half of this year, fund redemptions accelerated. In the second quarter, investors redeemed 240.176 billion yuan of active equity funds. Combined with the 279.7 billion yuan of net redemptions by investors in the first quarter, in the first half of 2024, investors redeemed 519.876 billion yuan.

The phenomenon of large-scale redemption of traditional top funds is quite prominent.

A reporter from 21st Century Business Herald found that some of the funds under former star fund managers Qiu Dongrong and Fan Yan, as well as current top fund managers Zhang Kun, Ge Lan, Liu Yanchun, Xie Zhiyu, Fu Pengbo, Xiao Nan, Zhao Feng, Feng Bo, Hu Xinwei, Cao Mingchang, Fu Youxing, Liu Xu, Qiao Qian, Li Xiaoxing and Tang Xiaobin, all saw a large number of shares redeemed in the second quarter.

Image source: IC photo

Redemption Acceleration

Recently, Changjiang Securities pointed out in a research report that active equity funds were still redeemed at an accelerated pace in the second quarter of 2024, with a total net redemption of 240.176 billion yuan in the second quarter, of which new funds issued 23.262 billion yuan and old funds had a net redemption of 263.438 billion yuan.

In the first quarter, investors made net redemptions of 279.7 billion yuan.

This means that investors had a net redemption of 519.876 billion yuan in the first half of the year.

Based on this calculation, the fund had an average net redemption of 86.6 billion yuan per month in the first half of the year, with a net redemption of 80 billion yuan per month in the second quarter.

If we rank the net redemption amount of active equity funds in a single quarter, data from the past 10 years show that the third quarter of 2015 ranked first, the first quarter of 2024 ranked second, and the second quarter of 2024 ranked third.

Some people in the fund industry believe that this to a certain extent explains the source of the market sell-off. That is to say, investors have been continuously redeeming funds this year, which has led to fund managers continuously cutting their positions and "dumping" their own heavily-weighted stocks.

According to statistics from the 21st Century Business Herald reporter, available data for the second quarter alone showed that the "national team" Central Huijin Investment Co., Ltd. increased its holdings of ETFs by more than 170 billion shares in the first quarter.

In the second quarter, Central Huijin continued to buy six "giant" ETFs, including Huatai-PineBridge CSI 300 ETF, E Fund CSI 300 ETF, China Asset Management CSI 300 ETF, Harvest CSI 300 ETF, Southern CSI 500 ETF and China Asset Management SSE 50 ETF, increasing its holdings by 9.6 billion shares. According to the average transaction price in the second quarter, Central Huijin spent more than 30 billion yuan in total.

As of the end of the second quarter, based on the calculation of Central Huijin's ETF holdings at the end of last year, it is estimated that the market value of Central Huijin's heavily held ETFs is around 500 billion yuan, which is roughly equivalent to the net redemption of 519.876 billion yuan by fund investors in the first half of the year.

If we consider that Central Huijin bought a large number of small and micro-cap ETFs in the first quarter when small and micro-cap stocks were falling in a stampede, the market value of ETFs held by Central Huijin at the end of the second quarter may be larger than the estimated data.

In this regard, some people estimated that the scale of the "national team"'s increase in holdings of broad-based ETFs in the first half of the year was around 340 billion yuan, which is roughly equivalent to the 359.1 billion yuan increase in stock ETFs in the first half of the year.

The reporter found that the redemption of active equity funds did not occur this year. This round of redemption has continued since 2022, but the redemption has accelerated in the first half of this year.

Wind data shows that at the end of 2021, the total size of mixed funds was 6.19 trillion yuan. This figure dropped to 3.33 trillion yuan at the end of the second quarter of 2024, a decrease of 2.86 trillion yuan, a shrinkage of 46%.

On the contrary, the share of bond funds increased by 9.31% in the second quarter, reaching a new high in recent years. The scale of bond funds increased from 6.88 trillion yuan at the beginning of 2022 to 10.60 trillion yuan at the end of the second quarter of 2024. In the past two and a half years (from the beginning of 2022 to the second quarter of 2024, the same below), it increased by 3.72 trillion yuan, an increase of 54%.

That is to say, in the past two and a half years, when the scale of mixed funds decreased by 3.33 trillion yuan, bond funds increased by 3.72 trillion yuan, indicating that in the past two or three years, funds have flowed from active equity funds to fixed income funds.

During this period, the total size of public funds continued to grow, from 25.45 trillion yuan at the end of 2021 to 30.71 trillion yuan at the end of the second quarter of 2024, an increase of 5.26 trillion yuan in the past two and a half years, a growth of 20.67%.

Wang Yi, a researcher at Jinzhang Investment under Geshang Finance, told reporters that the funds with the most redemptions this year are mainly active equity funds. The reason is that the stock market has been sluggish in recent years, active equity funds have performed poorly, and some funds have difficulty in achieving sustained excess returns compared to their performance benchmarks, so their scale has continued to shrink.

As for the bond funds that have received more subscriptions this year, Wang Yi believes that the reason is that the bond market has performed well this year, and pure bond funds have stable returns and small drawdowns, and are favored by conservative investors.

Yao Xusheng, a wealth manager at Paipai.com, also believes that the current phenomenon reflects investors' risk aversion in the face of market uncertainty. The redemption of active equity funds may be related to market volatility, investors' concerns about slowing economic growth, and reactions to the performance of some funds not meeting expectations. Bond funds and money market funds are favored, indicating that investors are beginning to seek stable assets and more defensive investment strategies.

Who was redeemed en masse?

The halo of top fund managers is gone, and many star funds have been redeemed.

According to the data in the second quarter, there are several types of funds with the most redemptions by investors:

One is the serious loss caused by the departure of star fund managers.

Qiu Dongrong officially announced his resignation on July 21. Amid the rumors, many funds under Qiu Dongrong's management had been redeemed in the second quarter, with the scale shrinking by about 6 billion yuan, a decrease of about 24%.

Fan Yan officially announced her resignation on April 3. The net redemption rates of the eight funds under her management exceeded 10% in the first half of the year, ranging from 12% to 82%.

The second is the large-scale redemption of quantitative and micro-cap strategy funds. It is worth mentioning that these funds all recorded negative returns in the first half of this year.

For example, the quantitative strategy funds that were once popular under star fund managers such as Ma Fang, Sun Meng, Hu Chonghai, Yang Meng, Sheng Fengyan, and Zhou Boyang saw a large number of redemptions this year when the quantitative strategies performed poorly.

Take Ma Fang as an example. Many of her funds have shrunk significantly: Guojin Quantitative Multi-Strategy had 3.27 billion shares at the end of the first quarter, and dropped to 1.35 billion shares at the end of the second quarter, a decrease of 1.92 billion shares, or 59%; Guojin Quantitative Select decreased by 930 million shares in the second quarter, a decrease of 27%; Guojin Quantitative Multi-Factor decreased by 600 million shares in the second quarter, a shrinkage of 21.5%.

In addition, in the second quarter, the net redemption of 710 million shares of Guotai Junan Quantitative Stock Selection under Hu Chonghai was 35%; the net redemption of 470 million shares of Penghua Quantitative Pioneer under Su Junjie was 50%; and the net redemption of 440 million shares of Western Profit Quantitative Growth under Shengfengyan was 40%.

Third, some top star fund managers were also affected. Funds under them, including Zhang Kun, Ge Lan, Liu Yanchun, Xie Zhiyu, Fu Pengbo, Feng Bo, Zhao Feng, Xiao Nan, Hu Xinwei, Cao Mingchang, Fu Youxing, Liu Xu, Du Yang, Qiao Qian, Li Xiaoxing, and Tang Xiaobin, all saw net redemptions in the second quarter.

Take Zhang Kun as an example. In the second quarter, all four funds under Zhang Kun were redeemed in small proportions. For example, E Fund Blue Chip Select was reduced from 23.796 billion to 23.256 billion, a decrease of 540 million shares; E Fund High-Quality Enterprise Three-Year Holding was reduced from 5.619 billion to 5.420 billion, a decrease of 200 million shares; E Fund High-Quality Select was reduced from 3.005 billion to 2.957 billion, a decrease of 48 million shares; E Fund Asia Select was reduced from 4.532 billion to 4.314 billion, a decrease of 218 million shares.

In terms of market performance, E Fund Asia Select rose 9.67% in the first quarter and another 7.19% in the second quarter. Despite a net redemption of 218 million shares, the total scale in the second quarter still increased by 2%. The other three funds under Zhang Kun - E Fund Blue Chip Select, E Fund Quality Enterprise Three-Year Holding, and E Fund Asia Select - performed generally in the second quarter, with returns falling by 2% to 4% and scale shrinking by more than 5%.

Under the impact of redemption and market fluctuations, Zhang Kun's management scale dropped from 64.732 billion yuan to 61.681 billion yuan in the second quarter, a decrease of 3.051 billion yuan, or 4.71%.

In addition to Zhang Kun, many other star fund managers had their fund shares redeemed in the second quarter.

For example, 808 million shares of China Europe Healthcare Fund under Ge Lan were redeemed in the second quarter, and 2.289 billion shares were redeemed in the first half of the year, with a decrease of 13.335 billion yuan in the first half of the year. The market's largest medical theme fund saw a decrease of 11.12% in the second quarter and 28.91% in the first half of the year.

Invesco Great Wall Emerging Growth, owned by Liu Yanchun, saw a net redemption of 501 million shares in the second quarter, with its scale decreasing by 3.539 billion yuan, a drop of 12.99%.

The three-year holdings of E Fund High Quality Selection under Xiao Nan saw a net redemption of 497 million shares in the second quarter, a decrease of 558 million yuan, or 5.80%.

Hu Xinwei's China Universal Value Creation Fund had a net redemption of 497 million shares in the second quarter, with a scale reduction of 558 million yuan, a decrease of 5.80%...

The trend may still not be optimistic. Wang Yi pointed out that due to the low sentiment in the stock market and the poor profit effect, active equity funds will still face redemption pressure. The demand for stable returns still exists, so bond funds may continue to attract attention from funds.

For investors, Wang Yi suggested: "It is a good choice to allocate some bond funds as ballast. On this basis, it is recommended that investors allocate some index funds or equity funds with stable excess returns compared to the index to increase flexibility."