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Securities Times reporter Yu Shipeng

As of August 16, the Bond FOF has been in operation for nearly three years since its launch in August 2021.

In the past three years, bond funds have been favored by investors, but the development of bond FOFs has continued to be sluggish, with the total scale falling by 50%, and the scale of the largest product shrinking by more than 75%. In terms of performance, bond FOFs are inferior to short-term and medium-term pure bond funds, and some products even underperform the performance benchmark. In the context of the "bond bull", why did bond FOFs fall behind?

The scale has dropped by 50%

According to the data from iFinD of Tonghuashun, as of August 16 this year, the number of FOFs established in the entire market has reached 501 (calculated by combining different shares), with an issuance scale of 270 billion yuan. Among them, there are only 20 bond FOFs with an issuance scale of 8.46 billion yuan. As of now, the total scale is 4.235 billion yuan, a decrease of 50% compared with the issuance scale.

Specifically, the first bond FOF in the entire market, Ping An Yingsheng's three-month stable allocation bond FOF, was established in August 2021 with a scale of 209 million yuan. The bond FOF established that year also includes Yongying Huiying's one-year bond-holding initiator FOF, with a fundraising scale of 228 million yuan. Although it has been running for nearly three years, and the market has had a significant "bond bull" market during this period, the scale and performance of these two FOFs have not shown obvious synergy. As of now, the scale is only 187 million yuan and 11 million yuan respectively, and the return rate since its establishment is only 2.41% and 2.99% respectively. In the past three years, the average yields of short-term pure bond funds and medium- and long-term pure bond funds have exceeded 8% and 10%, respectively.

In addition, the largest bond FOF in the market appeared in 2022. In that year, a total of 9 bond FOFs were established in the market. Xingzheng Global Preferred Stable Six-Month Holding Bond FOF ranked first with a fundraising scale of 2.403 billion yuan, and Cathay Pacific Ruiyue 3-Month Holding Bond FOF also raised 1.005 billion yuan. However, as of now, the scale of the above two funds is 533 million yuan and 516 million yuan respectively, with a decrease of 77.82% and 48.66% respectively, and the yield since its establishment is just over 5%.

Since 2023, the "bond bull" market has become more obvious, but the number of bond FOFs issued in the entire market has decreased successively, with only 7 and 2 respectively. Except for the Southern Haoxiang 3-month holding bond FOF established in early 2023, the issuance scale of the remaining 8 FOFs is less than 1 billion yuan. The scale of Huatai-PineBridge Xiangtai Stable Pension Target Bond FOF, Huaan Ying'an Stable Preferred 3-month Holding Bond FOF, and Jianxin Tianfu Youxiang Stable Pension Target Bond FOF is less than 400 million yuan. So far, the two bond FOFs established in 2024 are both from Xinyuan Fund. Except for the Huaxia Jushun Preferred 6-month Holding Bond FOF currently being issued, there are no FOF products among the 18 funds waiting to be issued.

Two reasons led to falling behind

"Bond FOF is a sub-category within the FOF classification. Although 20 products have been issued, it has always been lukewarm." A senior fund researcher told the Securities Times reporter that as of the end of the second quarter of 2024, the scale of the 20 existing bond FOFs was all below 1 billion yuan, and several of the initiated products were already small and micro in scale, and may face liquidation next.

The fund researcher believes that the bond market has been good in recent years, but bond FOF has not been able to do well. There are two main reasons: First, bond FOF is a product mainly for institutional clients, and a considerable part of it is customized by institutions, which bond FOF cannot subscribe to. Secondly, a considerable part of the bond funds with good performance in recent years are fixed-open closed products. Since such products are in a closed period for a long time, bond FOF cannot buy them. Even if they can buy them, they have to consider the redemption of holders. It can be seen that bond FOF basically holds open-ended bond funds, and many products hold more than 20% of their own funds.

In addition, a bond fund manager told the Securities Times reporter that the bond business is mainly for institutional clients, and clients generally choose to buy bond funds rather than bond FOFs. In the view of the fund manager, this is mainly due to cost considerations, because bond FOFs not only have a "double ten" ratio limit, but also have double charging issues. "Bond clients are basically professional institutional clients, and they will have more detailed considerations on these aspects." The bond fund manager said.

The configuration range can be appropriately expanded

It is not difficult to find that the development difficulties of bond FOFs are related to the overall difficulties of FOFs as well as their own product structure and bond varieties. In addition, affected by factors such as the lack of significant short-term profit effects, some bond FOFs are facing product liquidation and fund manager resignation.

Take the Puyin Steady Return 6-month Bond FOF as an example. On August 10, the product announced that fund manager Chen Shuliang had resigned and hired Miao Xiamei as the new fund manager. As of the end of the second quarter, the scale of Puyin Steady Return 6-month Bond FOF was 55 million yuan. Chen Shuliang is the director of the FOF business department of Puyin Ansheng Fund. As of now, Chen Shuliang has resigned from all FOF products under it.

The aforementioned fund researcher believes that it will take some time for bond FOF to reverse the current situation. One way to try is to appropriately expand the scope of allocation, such as holding bond ETFs as a position to improve investment liquidity. In addition, Wang Tieniu, director of the Ji'an Jinxin Fund Evaluation Center, suggested that public offering FOFs should break through the model of mainly allocating traditional major categories such as equity and fixed income, and consider including major asset categories such as REITs and commodities in the allocation scope within the scope permitted by laws and regulations. At the same time, adopt more flexible fee levels and better use of digitalization to improve the ability to select products.

From the perspective of investment research capabilities, Liu Yiqian, head of the Shanghai Securities Fund Evaluation Research Center, said that FOF managers need to strengthen their internal skills, make good basic asset allocation, respect customer experience, and achieve relatively stable and sustainable management returns. In addition, FOF managers should have a deeper understanding of fund products and select more suitable and more competitive products for portfolio services to optimize portfolio management performance.