Can mixed valuation method funds become a sharp weapon for “resistance to net worth retracement”?
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On January 30, Penghua Fund, China Merchants Fund, Southern Fund, and E Fund respectively disclosed the issuance documents of new products. Among them, it is worth noting that these four products are the first public offering asset management products with mixed valuation methods in China.
When it comes to hybrid valuation, many people have never heard of it, let alone the specific characteristics. But do you still remember that at the end of 2022, a large area of bond funds and bank wealth management products fell below the net value? At that time, many investors “wept” to stop losses and sold bond funds and bank wealth management products at prices below cost.
One of the important reasons for this is that after the official implementation of the new asset management regulations, funds and wealth management products are strictly stipulated that unless they meet special conditions, they can only strictly use the market price valuation method to value funds and wealth management products, that is, the underlying assets. The price directly determines the price of asset management products.
At that time, after the first round of net value declines in funds and wealth management products, some holders stopped selling products at a loss, and the managers had to sell the bonds they held, which caused the underlying asset prices to come under pressure again, and eventually formed a repetition of “stampede”. But in fact, if fund and bank wealth management holders do not choose to stop losses and continue to hold bond funds and bank wealth management, as long as the underlying assets do not default when they mature, investors will not suffer losses in the end.
The amortized cost valuation method is regarded as a sharp tool to control the withdrawal of the net value of asset management products, and has been repeatedly discussed by the asset management industry recently. If the funds and bank wealth management products sold at that time were valued using the amortized cost method, that is, the final income of the underlying assets was converted into each day, the stampede in the financial market might not have happened. However, in order to break the rigid redemption and net value, after the implementation of the new asset regulations, the market price valuation method will replace the amortized cost valuation method and become the standard configuration of asset management products.
This time, the mixed valuation method used by the new funds issued by Penghua Fund, China Merchants Fund, Southern Fund, and E Fund is that some underlying assets are valued using the amortized cost method, and the other part is valued using the market price method.
Taking “Penghua Yongrui One-Year Closed Bond A” as an example, the fund’s investment portfolio ratio is: the proportion of investment in bond assets is not less than 80% of the fund’s assets, and the investment in bonds valued by the amortized cost method Assets should not be lower than 50% of the fund’s net assets, and bond assets that adopt trading strategies and be valued by the market price method should not be lower than 20% of the fund’s net assets.
These four funds can break the “constraint” of the market value valuation method because the new asset management regulations also stipulate that those that meet one of the following conditions can be measured at amortized cost in accordance with the accounting standards for enterprises: asset management products are closed-end products , and the invested financial assets are held to maturity for the purpose of collecting contractual cash flow; asset management products are closed-end products, and the invested financial assets do not have an active trading market for the time being, or there is no quotation in an active market, and cannot be used Valuation techniques reliably measure fair value.
This means that a certain closed period is the prerequisite for the product to use the amortized cost method, or the financial assets invested must be held to maturity, or the financial assets are inactive and have no quotation, which means that the liquidity of the product is relatively poor .
The closing period of the mixed stock index fund launched by Penghua is 1 year, and the closing period of the newly issued products of China Merchants Fund, China Southern Fund and E Fund is 30 months, 18 months and 18 months respectively.
The longest closing period of these four mixed valuation funds is no more than 2.5 years, which is much shorter than that of the previous bond funds using the amortized cost method, which generally exceed 4 years.
In the eyes of industry insiders, mixed valuation method funds are conducive to attracting more individual investors to invest in bond funds. The hybrid valuation method combines the advantages of the two valuation models, moderately reduces product volatility while maintaining a wide investment range, meets the transition needs of net worth transformation, and alleviates the short-term impact on the wealth management market brought about by the initial implementation of new asset management regulations. However, in the long run, the market value valuation method is still the general trend.
For investors, is it acceptable to sacrifice liquidity for higher returns and lower volatility?
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