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This edition’s pictures are provided by Tuchong Creative and this edition’s graphics are drawn by Chen Jinxing

Securities Times reporter Wang Xiaoqian

Recently, "industrialization" has become a hot word in fund investment research.

Under the current background of economic and social transformation, the breadth and depth of fund investment research are facing more challenges. How to realize the "industrialization" of the investment research process and stably output correct investment research decisions is the key for fund companies to achieve high-quality investment returns.

Industry insiders believe that by strengthening professional division of labor, ensuring that investment and research personnel perform their respective duties, and creating a unified strategy system and professional investment model, fund companies can stably achieve "repeatable success" and give full play to the effectiveness of the investment and research system. At the same time, establishing a flexible incentive mechanism and highlighting the comprehensive capabilities and long-term contributions of researchers will also help fund companies better respond to market changes and customer needs.

In addition, breaking down the barriers between investment and research and achieving collaborative cooperation will help improve the scientificity and accuracy of investment decisions and help fund companies remain invincible in the fierce market competition.

Breadth and depth overlay standard process

Investing in research to achieve “industrialization”

Compared with the past, the current economic and social transformation has been obvious, which has led to significant changes in the investment environment.

Xu Xin, executive vice president of China Europe Fund, said in an interview with a reporter from Securities Times that the number of listed companies and the degree of industry segmentation have greatly increased, which has brought greater challenges to fund companies' investment research in terms of breadth and depth. In order to obtain a better risk-return ratio for the investment portfolio, fund companies also need to conduct in-depth and extensive research on different types of assets such as bonds, commodities, and overseas assets. This undoubtedly requires fund companies to work harder on the depth and breadth of investment research.

Xu Xin also emphasized that while expanding the depth and breadth of investment research, fund companies also need to pay attention to a key factor, namely the standardization of investment research processes, a process that can be called "playing snooker." "Many people can play snooker, but the difference between amateurs and professionals is that the former may hit the ball many times before they can get an accurate shot and a good position, and this success is obviously accidental; the latter, through long-term deliberate training, make their movements more standardized, thereby reducing the probability of error in each shot." The same is true for investment research, which requires a scientific combination of depth, breadth and process standardization to achieve "repeatable success." In this regard, fund companies especially need to learn from China's advanced manufacturing industry, carefully polish every link and process in the production process, improve the yield rate, and provide customers with truly high-quality, large-capacity financial products.

Zhonggeng Fund has actually been involved in the "industrialization" of public investment research for a long time. Since its establishment, the company has continuously iterated and evolved its low-valuation value investment strategy system, striving to establish a first-class competitive advantage in the field of active equity investment. In layman's terms, the low-valuation value investment strategy system is like a mature modern "factory". In this "factory", relying on the underlying unified low-valuation value investment strategy, Zhonggeng Fund has gathered outstanding talents and established a three-dimensional investment research process. Every person and every team in the investment research framework, through alpha superposition, forms a high alpha collection, giving full play to the effectiveness of the systematic development of investment research, and ultimately better serving every product produced by the "factory".

Unified underlying language

Strengthen job collaboration

Xu Xin also told the Securities Times reporter that at present, China Europe Fund has established four major investment sectors: stocks, bonds, multi-assets and quantitative, and has enhanced the breadth and depth of investment research through in-depth professional division of labor.

For example, before investing, the multi-asset strategy team must first clarify the investment goals of different clients and products, and then build an asset allocation portfolio with corresponding strategies and tactics. The portfolio may involve different asset categories such as stocks, bonds, commodities, and derivatives. In order to achieve better risk-return characteristics of the portfolio, it is also necessary to further subdivide the strategy for each type of asset, such as subdividing stock investment into dividend, value, prosperity, and quality styles according to different sources of income, and using a combination of fundamentals and quantitative methods to build a segmented strategy model and continuously perform data backtesting for optimization. In the investment process, risk control and performance attribution must also be done well. By constantly polishing every detail, a more professional and scientific investment process can be formed.

Huang Hua, investment director of the Multi-Asset and Solutions Investment Department of China Europe Fund, elaborated on this practice in more detail. He told the Securities Times reporter that in recent years, customers' investment behaviors have become increasingly diversified, especially the proportion of investment in stable assets has increased.

He believes that in the face of this situation, fund companies can focus on several directions: first, build a flexible and diversified asset allocation "machine"; second, establish an industrialized "production line" for multi-asset allocation; third, pursue a multi-asset product line with high yield rate; fourth, form an investment team with diverse backgrounds and complementary capabilities.

"Our business covers bonds, convertible bonds, stocks and derivatives, and will also involve CTA (commodity trading advisor) strategies in the future. Different strategies require talents from diverse backgrounds to cooperate with each other to form an investment team with complementary capabilities," said Huang Hua.

According to reports, there are currently more than 20 members in the multi-asset team of China Europe Fund, including team leaders in key positions, people responsible for major asset allocation, excellent stock fund managers, and professionals with many years of experience in the FOF (fund of funds) field. In Huang Hua's view, although the team members are very capable, due to their different backgrounds and work, how to organically bring these talents together will be a huge challenge.

Huang Hua believes that to achieve the goal of "industrialization" of investment research, the team needs to reach unity in several dimensions. First, it is a unified underlying quantitative thinking. Since the backgrounds of team members are diverse and the business involves stocks, bonds, FOF, etc., how to discuss with quantitative thinking and unified language is particularly critical. Secondly, it is the improvement of asset allocation capabilities. Finally, it is the enhancement of strategic innovation capabilities. He emphasized that the decay and iteration speed of market strategies are very fast, so the team must focus on strategy innovation to meet the rapidly changing market needs.

Changing the performance appraisal model

Establish a reasonable incentive mechanism

In the process of realizing the "industrialization" of investment research, in addition to giving full play to the comparative advantages of investment research talents, the incentive mechanism of fund companies is also a key area of ​​discussion in the industry.

In this regard, Pan Fuxiang, Chairman of Nord Fund Management Co., Ltd., pointed out that public funds need to adjust their investment strategies and product operation models according to the new market environment and economic development characteristics. Specifically, he summarized two points: first, the relationship between scale and performance should be properly handled; second, the short-term and single assessment model should be changed.

Pan Fuxiang emphasized that any investment operation model or investment portfolio reflects the fund manager's personal judgment on future economic development and market changes. If the net value growth is the only evaluation criterion and too much emphasis is placed on short-term performance, the fund manager's way of thinking will be limited. After all, those risky and betting investments may get higher returns in the short term.

Previously, the director of investment research of a public fund in Shanghai also said that in the process of realizing the "industrialization" of investment research, a sufficient and reasonable incentive mechanism needs to be established. In order to stand out in the fierce market competition, fund companies need to incentivize players in niche tracks and ensure that every talent can play a full role in the field they are good at.

For example, for fund managers who have performed well in a particular track, the company provides them with more resources to help them further improve their professional level. At the same time, by introducing mechanisms such as mutual evaluation, the comprehensive capabilities and long-term contributions of investment and research personnel can be more comprehensively measured to avoid the one-sided pursuit of short-term returns and curb the frequent occurrence of high-risk investment behaviors.

Tear down “departmental walls”

Close collaboration with investment research staff

Talent incentives are certainly indispensable, but close cooperation between the investment and research departments is undoubtedly an important driving force for achieving the "industrialization" of investment research.

Yu Chunling, chairman of Xinhua Fund, believes that many domestic institutions are still facing the problem of "two skins" in investment and research. As they attach more importance to research, many institutions will set up separate research departments. In reality, due to differences in organizational culture, management structure, and personality of department heads, the relationship between the investment department and the research department is often not coordinated enough. In this case, the relationship that should have been mutually supportive and cooperative has turned into mutual competition, thus forming the so-called "department wall".

A fund evaluator in Shanghai also said that poor collaboration between investment and research departments will not only reduce decision-making efficiency, but may also lead to the inability to effectively combine investment strategies and research conclusions, thus affecting overall investment performance.

He believes that institutions can set up cross-departmental project teams or working groups to encourage investment and researchers to participate in projects together. In addition, management should strengthen inter-departmental collaboration and allow investment and researchers to share their investment views and latest research results through regular joint meetings or seminars.

In addition, building an information sharing platform is of course indispensable. Institutions should establish an efficient information sharing system so that investment and research departments can easily and quickly obtain each other's research results and data support, ensuring unimpeded information flow.

Zhonggeng Fund also stated that in the process of promoting the "industrialization" of investment research, close cooperation between fund managers and researchers is one of the key points. Fund managers will refer more to the opinions of researchers with research advantages, especially at the level of individual stock selection, and ensure that the alpha created by researchers can be effectively used by fund managers by following a consistent strategy system, thereby maximizing investment returns. This cooperation model not only highlights the value of researchers, but also improves the scientificity and accuracy of overall investment decisions.