The new income of the fund was cut by half? The myth of unbeaten new shares ended, and fund managers changed their playing methods one after another
May 1st, 2022

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From the “invincible myth” to frequent breaking, the fund’s attitude towards new shares is changing significantly.

On the one hand, as an important buyer in the new market, the frequent breaking of new shares has significantly reduced the fund’s new income, and the enthusiasm for new shares has also cooled down. In order to reduce the impact of the breaking of new shares on investment income, some funds choose not to participate in the new development, and some funds are adjusting the new development strategy and making positive response.

On the other hand, as a professional institutional investor, public funds also bear the important responsibility of discovering the value and reasonable pricing of new shares. From the previous holding together to lower the price to high valuation, the IPO market-oriented reform under the registration system is putting forward higher requirements for the fundamental research and quotation ability of public funds.

New shares broke frequently, and the fund’s new income shrank sharply

Since the introduction of “IPO pricing” in September last year, the IPO market has been more and more broken. Especially since this year, with the superposition of market shock and low investor sentiment, the breaking of new shares has reached a small climax in the near future.

Wind data show that as of April 22, 39 of the 114 new shares listed on a shares this year broke on the first day of listing, accounting for more than 34%. Since April, the breaking of new shares has further intensified. 16 of the 28 listed new shares broke on the first day, with a proportion of about 57%. The era of making new and stable profits without loss is gone forever.

As an important participant in offline innovation, the yield of public funds has also shrunk sharply in this round of breaking tide.

The fund manager of a new fund in Shanghai disclosed to the securities times that a public offering new fund with a scale of about 500 million can contribute about 6-8% of the annualized return in previous years. This year, he expects that it may be reduced to 2-3% or cut in half.

Yan Jiawei, Financial Engineering Analyst of Hua’an securities, calculated the monthly new revenue since November 2021. Under the assumption that all new shares were shortlisted, and based on the average winning rate of offline class a investors (public funds and social security funds), it is estimated that the new revenue of 200 million scale accounts in November 2021 was 1669400 yuan, that in December 2021 was 1440700 yuan, and that in January 2022 was 878200 yuan, The new revenue in February 2022 was 189900 yuan, the new revenue in March 2022 was 530300 yuan, and the new revenue in April 2022 was -100400 yuan. The new revenue decreased month by month.

“The core of the future still depends on whether the issuing price of new shares is still high. At the same time, we also need to always pay attention to the performance of the A-share market. We believe that as long as we make innovations and strengthen, there will still be promising areas in the future.” Said Zeng Wenhong, manager of Nord fund.

Decreased enthusiasm for participation and cautious attitude towards participation

The frequent breaking of new shares is greatly affecting the participation enthusiasm of investors. Retail investors and institutional investors are responding to the breaking of new shares with their own practical actions. A number of fund sources said that the number of accounts of the company participating in new development has decreased, the participation attitude has become cautious, and even some funds choose not to participate in new development.

Zhou Ping, general manager and fund manager of Western Lide fund fixed income + investment department, took the data as an example, “For example, we recently saw that retail investors abandoned the purchase of new shares to a new high; for example, from the perspective of offline subscription, the number of accounts participating in inquiry reached 11500 at the peak, which has now decreased to about 7500-8000, and the overall number of accounts has decreased significantly; in addition, investors also began to judge the quality of new shares, and the number of accounts participating in some new shares is even only about 4000-5000.”

Zeng Wenhong, the fund manager of Nord, also admitted that the breaking of new shares will indeed have some impact on the enthusiasm of participation. “The quotation in the market is rising, the winning rate is declining, the new income is also shrinking, and the number of products we participate in is decreasing as a whole.”

Yan Jiawei made statistics on the recent fund’s new participation from the two dimensions of company level and product level:

From the perspective of fund companies, in the past three months (i.e. from January 2022 to now), there are 57 fund companies with a participation of more than 90%. Compared with the tracking data one month ago (from December 2021 to March 18, 2022, there are 85 fund companies with a participation of more than 90%), the participation of fund companies in innovation has decreased rapidly;

From the perspective of products, the median participation rate of active equity funds in the past three months is 83.12%, the shortlisted rate of inquiry is 64%, the median participation rate of fixed income + funds in the past three months is 71.43%, and the shortlisted rate of inquiry is 62.5%. Some fixed income + funds have taken the lead in withdrawing from the new market.

For a long time in the past, innovation was an important way for fund types such as fixed income + funds and index enhancement funds to increase their returns. In the face of frequent breaking of innovation, many funds had to change their investment strategies, and this change has been confirmed in the first quarterly report just disclosed.

For example, in a quarterly report just disclosed, a fixed income + fund said that since the breaking of new shares has become the norm, the new income has decreased significantly, the central position of the stock has been appropriately improved, and the stock structure has changed from undervalued blue chip to a configuration dominated by industries with tight supply and demand in the necessary consumption, real estate industry chain and new energy industry chain, from relying on the active stock selection and aggressiveness to increase the stock bottom position to thicken the income.

For another example, fof generally participates in innovation through two levels: one is to allocate new fund or fixed income + fund to indirectly obtain new income; Second, build a stock bottom position and directly participate in the subscription of new shares.

However, in the first quarterly report of this year, a fof product wrote, “because new shares are frequently broken, the fund has reduced the stock bottom position in the portfolio to be purchased with new shares, and redeemed the new share strategy fund at the same time.” In addition, some pension fofs with stable style began to reduce the subscription of new shares as early as the end of last year. A pension fof wrote in last year’s fourth quarter newspaper, “in the fourth quarter, considering the decline of new income, the fund will no longer participate in new investment and gradually convert bottom stocks into equity funds.”

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