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China News Service, August 2 (Xue Yufei) "This fund is not worthy of its name, it should be called Huaan Technology Chip Fund." A netizen left a message on the "Huaan Low Carbon Life Hybrid" page on a fund platform. Huaan Low Carbon Life Hybrid said in its second quarter report of 2024 that it focuses on the three major AI-related fields. As of the end of the quarter, the top ten holdings of the fund were basically artificial intelligence and semiconductor stocks.

Not only the above-mentioned products, China New Economic Network found that there are similar situations in many public funds on the market. For example, the "culture, sports and health" products bought nuclear power and new energy stocks, the "big security" products bought real estate and liquor stocks, and the "modern service industry" products had 80% of their positions in manufacturing and electricity, heat, gas and water production and supply industries.

　　"Low-carbon life" funds are heavily invested in semiconductors and AI

Huaan Low Carbon Life Hybrid was established in March 2019 and has been managed by fund manager Li Xin. According to the "Stock Investment Strategy" in the fund contract of the product, the "low carbon life" referred to by the fund is a general term for environmentally friendly and healthy lifestyles such as low carbon, environmental protection, health, and energy saving. "Low carbon life" relies on energy conservation and environmental protection, new generation information technology, industrial manufacturing, biomedicine and other advanced technologies to provide people with more low carbon, environmentally friendly and healthy products and services, and comprehensively improve people's quality of material life and spiritual life in clothing, food, housing, transportation, health, education, sports, entertainment and so on.

　　The fund contract also states that Huaan Low Carbon Life Mixed Fund refers to the "low-carbon life" investment theme, which focuses on industries and themes such as energy conservation and environmental protection, green consumption, new energy and new materials, and new energy vehicles.

According to the first quarterly report after its establishment, namely the second quarter report of 2019, among the top ten holdings of Huaan Low Carbon Life Mixed Fund are wind power and hydropower companies such as Goldwind Science & Technology and China Yangtze Power. It also holds aviation and military stocks such as AVIC Optronics, AVIC Shenyang Aircraft Corporation, and AVIC Aircraft.

In the quarterly reports of 2021 and 2022, the fund has repeatedly stated that information, energy, and health are still the essential and basic support and needs for social development and people's lives, but in different time periods, the industrial elements of various industries are constantly changing and evolving, and it is necessary to make careful and timely changes on the investment side through rigorous and comprehensive research. In the past two years, semiconductor and artificial intelligence stocks have accounted for the vast majority of the fund's heavy holdings.

Entering 2023, the artificial intelligence sector is booming, and Huaan Low Carbon Life Hybrid continues to support this sector. The top ten holdings are basically technology and semiconductor stocks. As of the end of the second quarter of 2024, the fund's top ten holdings are: Hua Hong Semiconductor, New Eoptostar, North China Capital, Zhongji Xuchuan, Industrial Foxconn, Cambrian, SMIC, Luxshare Precision, Avionics Holdings, and Transsion Holdings.

In the "Notice on Not Evaluating Funds in the Fourth Quarter of 2023" and "Notice on Not Evaluating Publicly Offered Funds in the First Quarter of 2024" issued by the Ji'an Jinxin Fund Evaluation Center, the funds were not evaluated due to the existence of "style drift".

In the above two statements, Ji'an Jinxin Fund Evaluation Center stated that public securities investment funds are tools for investors to build investment portfolios. When the actual investment style of the product deviates from the investment style agreed in the fund contract, it may cause additional losses to investors who trust the fund contract. Therefore, if the actual investment style of the fund product is seriously inconsistent with the style agreed in the fund contract after evaluation by Ji'an Jinxin Fund Evaluation Center, it will not be rated.

Regarding the deviation between Huaan Low Carbon Life Hybrid's investment targets and the original investment theme and the fact that institutions twice believed that the fund had a "style drift", China Business Network sent a letter to Huaan Fund's email address, but no reply was received as of press time.

In addition, the investment goal of Jianxin's big security strategy is "mainly investing in high-quality securities related to the big security theme", but the top ten holdings at the end of the second quarter included three liquor stocks: Kweichow Moutai, Shanxi Fenjiu, and Luzhou Laojiao; the investment goal of Cathay Big Health stocks is "mainly investing in big health theme stocks", and the top ten holdings at the end of the second quarter included B.L.F., CATL, Black Cat Holdings, and Jinbo Holdings.

　　Is the industry scope too broad?

In addition to some funds whose investment targets are obviously inconsistent with the original investment scope, China Business Network found that some public funds have relatively broad regulations on investment industries, which can be subdivided into more than a dozen or even twenty sub-industries.

Source: E Fund Modern Service Industry Flexible Allocation Fund Contract

According to the fund contract of E Fund Modern Service Industry Flexible Allocation, the fund believes that industries related to the investment direction of modern service industry include but are not limited to pharmaceutical biology, automobile, commerce and retail, communications, computers, cultural media, architectural decoration, finance, environmental protection, catering and tourism, home appliances, transportation, public utilities and other industries.The above alone include 13 industries. At the same time, the fund also said that some sub-industries in other industries are in line with the investment theme of modern service industry, and it will also actively invest in companies in these sub-industries.

As of the end of the second quarter of this year, the fund's top ten holdings were Midea Group, Gree Electric Appliances, Wuliangye, Weichai Power, Xugong Machinery, Sichuan Investment Energy, Lingrui Pharmaceutical, Kweichow Moutai, Tiger Pharmaceuticals, and Jianmin Group. From the industry perspective, it includes home appliances, liquor, machinery, hydropower, and medicine. According to the classification of "domestic stock investment portfolio classified by industry at the end of the reporting period" in the second quarter report, the manufacturing industry and "electricity, heat, gas and water production and supply industry" accounted for 67.84% and 12.95% of the fund's net asset value respectively.

Source: China Universal Sports and Entertainment Theme Fund Contract

According to the fund contract of Huatai-PineBridge's cultural, sports and entertainment theme fund, the cultural, sports and entertainment theme listed companies referred to in the fund are listed companies engaged in cultural media, sports industry, entertainment and leisure, and education industry, as well as other listed companies related to the cultural, sports and entertainment theme that benefit from changes in lifestyle and upgrading of industrial structure.According to the fund contract's subdivision into four industries: cultural media, sports industry, entertainment and leisure, and education industry, each industry can be divided into at least 5-6 sub-industries.

As of the end of the second quarter of this year, the top ten holdings of China Universal's cultural, sports and entertainment theme were Tencent Holdings, Meituan-W, Dong-E E-Jiao, Kweichow Moutai, Tong Ren Tang, Dongpeng Beverage, Bosideng, PROYA, Tsingtao Brewery, and China Resources Vanguard. According to the classification of "domestic stock investment portfolio classified by industry at the end of the reporting period" in the second quarter report, the investment in education and "culture, sports and entertainment industry" accounted for 2.75% and 1.09% of the fund's net asset value respectively.

　　Organization: There is room for refinement of product naming standards

The Shanghai Securities Fund Evaluation and Research Center said in a report that the "unworthy" characteristics of funds can be divided into three categories: the first category is that although the fund manager strictly follows the investment scope agreement in the fund contract when managing the product, he does not strictly follow the constraints of the fund name on the investment scope; the second category is that the fund manager does not fulfill the provisions of the fund contract, resulting in a significant deviation from the actual investment; the third category is that the fund manager usually clearly defines a certain theme or style in the fund contract (or prospectus), but this definition is quite different from the public's understanding, which makes investors feel that the fund product has undergone a "style drift."

China News Service also found that there are deviations between fund names and actual investment targets. Many of the products bought the hot themes in the current market, but the return performance was not outstanding. Since 2023, the artificial intelligence sector has been a hot topic in the market. Huaan Low Carbon Life Mixed Fund further increased its holdings of stocks in this sector during this period. By the second quarter of 2024, the semiconductor sector heated up, and the fund chose to increase its holdings of stocks in this sector. Despite the hot themes, the fund's yield was barely positive in 2023 and the first half of 2024, at 0.04% and 3.82% respectively.

In addition, the Jianxin Big Security Strategy, which bought liquor stocks, had a return rate of -0.20% in the first half of this year; the Huatai Sports and Entertainment Theme Fund, which has a broad investment industry, had a return rate of 0.28% in the first half of this year.

According to the Shanghai Securities Fund Evaluation Research Center, China's naming of public fund products is mainly based on the "Regulations on the Operation and Management of Publicly Offered Securities Investment Funds" issued by the China Securities Regulatory Commission. Article 31 of the Regulations stipulates thatIf the fund name indicates an investment direction, more than 80 percent of the non-cash fund assets should belong to the content determined by the investment direction.

The center believes that when implementing the naming, most fund companies adopt the naming model of "fund company + investment characteristics/theme/style/industry + investment type". Among them, the expressions such as "theme/style/industry" are relatively fixed and easy to track, while "investment characteristics" are more subjective and have a stronger promotional effect on the product. In general, China has regulatory restrictions on fund naming, but there is still room for refinement and improvement in the specific naming of fund products.

(For more reporting clues, please contact the author Xue Yufei: [email protected]) (China News Service APP)

　　(The views in this article are for reference only and do not constitute investment advice. Investment is risky and you should be cautious when entering the market.)

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Editor: Wei Wei and Li Zhongyuan