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Three pension FOFs simultaneously issued announcements of possible liquidation. Why are pension FOFs having a hard time getting over the “three-year itch”?

2024-08-17

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A reporter from the Daily Economic News learned that the liquidation of pension FOFs is still continuing.

On August 17, three pension FOFs under Bosera Fund issued a warning announcement on the same day that may trigger the termination of the fund contract, and suspended the subscription and regular fixed investment business. The three products are Bosera Pension Target Date 2040 Five-Year Holding Period Mixed Fund (FOF), Bosera Pension Target Date 2045 Five-Year Holding Period Mixed Fund (FOF), and Bosera Pension Target Date 2050 Five-Year Holding Period Mixed Fund (FOF).

Taking the five-year holding of Boshi Pension Target Date 2040 as an example, according to the fund contract, the fund is an initiated fund. On the corresponding day three years after the contract takes effect, if the net asset value of the fund is less than 200 million yuan, the fund property will be liquidated and terminated in accordance with the fund contract. There is no need to convene a general meeting of fund unit holders for deliberation, and it cannot be extended by convening a general meeting of fund unit holders. The corresponding day three years after the fund contract takes effect is August 30, 2024, which is the end of this month. If the net asset value of the fund is less than 200 million yuan as of the end of August 30, the fund property will be liquidated and terminated in accordance with the fund contract.

The reporter of Meijing noted that these three pension FOFs were established on the same day, August 30, 2021. As of the end of the second quarter of this year, the scale of these three funds was 44 million yuan, 9 million yuan and 14 million yuan respectively.

According to Wind data, as of August 16, a total of 11 public offering FOFs have been liquidated this year, which is the same as the number of liquidations in the whole of last year. Among them, 6 products are pension FOFs, which has caused market concerns that pension FOFs will have difficulty in getting over the "three-year itch". Some industry insiders also pointed out that when the development of pension FOFs does not meet expectations, whether to keep the shell becomes a question facing fund managers, "there are new launches and exits, which is also a normal process of survival of the fittest."

Three pension FOFs issued announcements of possible liquidation on the same day

Another pension FOF may be liquidated.

On August 17, Bosera Fund issued a warning announcement that its three pension FOFs may trigger the termination of the fund contracts.

According to the announcement, Bosera Retirement Target Date 2040 Five-Year Holding, Bosera Retirement Target Date 2045 Five-Year Holding, and Bosera Retirement Target Date 2050 Five-Year Holding are all initiated funds. On the corresponding day three years after the effectiveness of the fund contract, if the net asset value of the fund is less than 200 million yuan, the fund property will be liquidated and terminated in accordance with the provisions of the fund contract. There is no need to convene a general meeting of fund shareholders for deliberation, and it cannot be extended by convening a general meeting of fund shareholders.

Since all three products were established on August 30, 2021, they will collectively reach the corresponding date three years after the fund contract takes effect at the end of this month. However, in terms of scale, the situation is not optimistic. The scales of the three funds are 44 million yuan, 9 million yuan, and 14 million yuan respectively. If the net asset value of the fund is less than 200 million yuan by the end of August 30, the fund property will be liquidated and terminated in accordance with the fund contract.

Simultaneously with the liquidation reminder announcement, there was also an announcement that the subscription and regular fixed-amount investment business of these three products would be suspended from August 19.

The reporter of the Economic Daily noted that the first fund manager of these three funds was Mai Jing, who joined Bosera Fund in May 2020. During her tenure, she served as the general manager of the multi-asset management department and managed seven FOF products, including several pension FOFs. In January this year, Mai Jing resigned from all the products she managed and also left Bosera.

Facing the upcoming "three-year exam", these products will face tremendous pressure if they want to continue to maintain their listing status, and liquidation is almost inevitable. What is more worrying is that as of August 16, a total of 11 public offering FOFs have been liquidated this year, which is the same as the number of liquidations in the whole of last year. Among them, 6 products are pension FOFs, reaching a small climax of liquidation.

Industry focus: Why is it difficult for pension FOF to overcome the “three-year itch”?

Wind data shows that a large number of public FOFs were established in 2021, with 133 new FOF products established in the entire market that year (calculated separately by shares), including many pension FOFs.

However, a rather embarrassing situation is that a considerable number of these pension FOFs are sponsoring funds, which means that the sponsoring fund provider will subscribe to the fund amount of no less than 10 million yuan, and the holding period will be no less than 3 years. However, on the corresponding day after 3 years, if the net asset value of the fund is less than 200 million yuan, the fund contract will automatically terminate. It has been exactly three years since 2021, so many products that do not meet the 200 million yuan threshold are generally facing the risk of liquidation.

Pension FOFs that have been liquidated this year (data from Wind, as of August 16)

It is worth noting that as a type of fund share set up separately for personal pension investment funds, a large number of pension Y shares are also under pressure. Wind data shows that as of June 30 this year, only 23% of pension Y share funds have achieved positive returns since their establishment, with an average annualized return of -3.23%. The holding experience is not good and has not played a role in preserving and increasing the value of pension assets in a volatile market.

Due to poor performance, insufficient market and investor awareness, etc., the scale of personal pension funds in the entire market has also grown very slowly. As of the end of the first quarter of this year, the total scale of personal pension funds in the entire market was 6.5 billion, and the average scale of a single product was only 35 million. Personal pension funds as a whole have been cold. The challenges faced by fund companies in the development of personal pension funds are also the problems encountered in the development of personal pension funds in the entire market.

A public fund person pointed out to the reporter of the Economic Daily that the cold reception of individual pension funds is largely related to the poor overall return of the products and the long holding period of the products. It is also related to the fact that the awareness of national pension funds is still relatively weak and the number of contributors is relatively low. In addition, the market has been fluctuating repeatedly in recent years, and the equity market has fluctuated greatly. Affected by the market conditions, the income of pension FOFs has not been as expected, and the scale has shrunk.

"When faced with the question of whether to maintain the listing, some managers may tend to maintain the listing out of the need to retain their product line layout and their optimism about future market conditions; while other fund companies may choose to liquidate the product because the scale of the product is too small and the maintenance cost is too high, which is understandable. Where there are new launches, there are exits, which is also a normal process of survival of the fittest."

Jia Zhize, managing director of Hualin Securities' asset management department, said frankly that the centralized liquidation of pension FOFs is an embarrassing result: "Public funds have always advocated medium- and long-term investment, and the investment of pension FOF holders is money that will be used after retirement. It seems to be a perfect match, but the liquidation clause is triggered due to operational problems of the fund company, and there is no chance to wait for the rose of time."

Regarding the future development of pension FOF, Jia Zhi said that with the changes in population structure, pension issues are long-term issues that concern everyone. Building the third pillar of personal pension with the support of national policies also has strong practical significance, and pension FOF will receive more attention. He suggested that public funds managing pension FOF should not only be a business, but also have feelings and mission: "For pension FOF products, we must take responsibility for the birth and maintenance of pension, work hard to achieve good performance and promote them, so as to live up to the trust of holders."

The above-mentioned public fund person pointed out that in response to the difficulties and challenges faced by pension FOF, on the one hand, fund managers should improve their professional capabilities and maintain long-term stable performance, and on the other hand, they should increase product supply and promote new issuance and ongoing operations. "In terms of promoting new issuance, we will strive to accelerate the implementation of stable pension FOF and balanced pension FOF, and in terms of ongoing operations, we will concentrate resources on expanding high-performance products."

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