Foreign private equity CTA strategy has more advantages
Foreign private equity has been in the A-share market for some time, but from the perspective of the industry, it is still in the stage of development. Although foreign private equity is well-known, in the field of traditional stock and bond investment, "foreign private equity" has not enough performance in China, and local private equity has more advantages. And foreign private equity also said that in the process of expanding business in China, localization and different investor concepts are the biggest tests. However, in terms of macro and CTA strategies, local institutions admit that foreign private equity has more advantages.
Equity and bond strategies does not have advantages
There are differences in compliance and challenges in channels
"Big thunder and little rain" is the industry's evaluation on foreign private equity's entry into A shares. This is mainly based on the fact that foreign private equity does not have much advantage in the traditional stock and bond investment fields, and it does not pose too much challenge to local private equity.
Rongli Jia, director of the research and consulting department of China Merchants Securities and chief of financial product research, analyzed to reporters that with the rapid development of the private equity industry, domestic investors and financial institutions have become increasingly mature and rational. In addition to fame, whether they have real active management capabilities, whether they can successfully implement the localized application of overseas strategies in China, and effectively respond to the continuous development and change of China's financial market is the influence of foreign institutions in China. The core is also the main consideration factor for investors to purchase foreign private equity products.
She said that for investors, the difference between foreign private equity and local private equity is mainly reflected in the investment model, strategic logic, and systematic structure. The acceptance of the product by investors depends on the investment objective, quality, differentiation and scarcity of the product.
She believes that in the field of traditional stock and bond investment, local private equity managers have more advantages. "Local private equity managers have been cultivating the domestic market for a long time. In recent years, they have gradually expanded to multi-regional and multi-market configurations at domestic and abroad. They have longer-term investment performance, wider visibility and reputation, and increasingly mature investment capabilities, marketing and brand operations are improving day by day, becoming the focus for the allocation of domestic institutions and high-net-worth individuals." However, the performance of foreign capital in China is still not enough and has not yet shown a special advantage.
Rao Fu, Investment Research Director of Beijing Jinzhang Investment and Research, a subsidiary of Geshang, added that foreign investment naturally has some advantages in branding. If the performance is also relatively competitive, foreign investment will indeed be more acceptable. However, the cooperation of pure foreign investment is still relatively small.
management companies have been in the market for more than 20 years and have considerable advantages in fundraising, market operations and brand awareness. Second, due to the differences between overseas compliance and risk control requirements and the Chinese market, it needs to do more homework when linking legal documents with domestic channels. Third, the systems that they use abroad cannot be directly matched with those in China, and they need to be localized and adjusted according to the actual situation before they can connect with the channels.
Schroder Investment said that it faces three major challenges in terms of channel. The first is competition from local companies. Many domestic asset
UBS Asset Management also stated that from an investment perspective, taking hedge funds as an example, there are many differences between domestic regulatory frameworks, business concepts, operating methods, industry standards and overseas, which require communication, adaptation and adaptation.
Bo Hu, the manager said that although he is optimistic that foreign capital has lots of opportunities for development in China, it needs a long-term outstanding performance to prove its own process. Because investors are more concerned about whether foreign private equity’s familiarity with the Chinese market can adapt to the characteristics of the Chinese market. The investor structure in the Chinese market is dominated by retail investors. Whether the long-term value investment advocated by foreign private equity can adapt to A shares has not yet been fully achieved. prove.
Macro, CTA strategy has more advantages
The investment philosophy and compliance rules of foreign private equity are quite domestically recognized. Rongli Jia said that foreign-funded institutions generally attach importance to value investment, growth investment, and long-term investment based on corporate fundamentals. Their investment logic is relatively stable and their investment styles are relatively mature.
Rao Fu pointed out that foreign investment will pay more attention to compliance issues, so they will be more cautious in product operations.
Currently, foreign investment has more advantages in macro and CTA strategies. Rongli Jia pointed out that compared with local private equity, foreign capital has certain advantages in macro hedging, CTA and other strategies, especially large foreign institutions with a global macro vision, which can provide domestic investors with special products in terms of global perspective and systematic investment. Foreign-funded institutions have better fulfilled their established investment goals.
Bo Hu also added that the overall maturity of overseas markets is higher, and various derivatives are more abundant. Therefore, foreign private equity has greater advantages in asset allocation, strategic application, and quantitative investment.
UBS Asset Management stated that, compared with the more mature overseas markets, retail investors account for a larger share of China's stock and futures markets, and market efficiency needs to be improved. At the same time, it has good liquidity and large capacity. These factors provide opportunities for hedge funds to pursue absolute returns.
Localization and investor education are the biggest tests
Liang Shen, managing director of Allianz Investment and head of China's asset management business, said that the success of a strategy in a market mainly depends on three factors: investment tools, market environment and investor attitudes.
Liang Shen believes that China is a growing market. For a successful overseas strategy to be successfully introduced into China, it must take into account overseas experience and meet the needs of investors, and use mature global experience to match the characteristics of the Chinese market. "This is not a matter of choosing one or the other, but the two are indispensable."
From the perspective of three elements, in terms of investment tools, it is necessary to think about how to introduce Allianz Investment’s global successful flagship strategy, with the overall market environment and regulatory policies moving towards internationalization, and at the same time, in line with the needs of Chinese investors, whether through investor education or introduction of high-quality strategies to domestic investors to increase investor awareness and acceptance is a practice that takes into account Allianz's global experience and Chinese investors keep pace with the times.
UBS Asset Management said that from the domestic high-net-worth investors it contacts, domestic investors will still tend to pursue absolute returns, ignoring the degree of risk exposure of products, and lacking attention to risk-adjusted returns. "In fact, many products have good investment returns on their own, but investors do not get good investment returns. The reason is that some investors pursue absolute returns, but they may step on the wrong pace."
Therefore, in the domestic market, for individual investors, they will focus more on making absolute return products and make some strategies to control withdrawals. They also strive to provide more diversified products to domestic customers, and hope to engage more with them. Chinese investors emphasize the concept of asset allocation and long-term holding.
Value Partners Investment also stated that the challenge of developing asset management business in the Chinese market lies in the matching of the investor's capital maturity and the maturity of the investment strategy. In the view of value investors, holding high-quality assets that can generate good cash flow for a long time and hedge against fluctuations with time can often reap better returns. But most investors find it difficult to accept longer periods and focus too much on short-term fluctuations. The situation of “funds make money, but holders do not make money” is a common issue for the domestic fund management industry to deal with. To this end, they will continue to do a good job in investor service and communication, and jointly promote investor education.
Schroder Investment said that in the process of expanding its business in China, its ability to insight into the market and its ability to integrate overseas platforms and local resources are the most challengeable factors.
Liang Shen pointed out that the greater difficulty may lie in the relative differences between Chinese market tools and investors and overseas ones. However, Liang Shen also said that Allianz Investment's global investment and risk management capabilities combined with local experience can transform investment difficulties into advantages.
UBS Asset Management emphasized that "UBS's mature investment philosophy, investment process, and the investment research capabilities and platform support of the global investment research team have been applied to the local strategies. Our local strategy has never been a simple copy of overseas strategy, but based on the characteristics of the Chinese market, it is necessary to carry out strategic and tactical configuration and dynamic management through in-depth research and insight into China's private equity hedge funds."