Dialogue With Deng Zhaoming, President Of Penghua Fund: Investment Research Ability Is Always The Core Competitiveness Of Asset Management Industry

In the 30 years of spring and autumn, China's capital market has grown from scratch, from small to large, with twists and turns, but it has always been firmly growing.

As the "top ten" companies in China's fund industry, Penghua Fund is a typical representative and witness of the rapid development of the capital market. As of the third quarter of 2020, the management scale of Penghua Fund has exceeded 750 billion yuan and the number of customers has exceeded 100 million yuan. The Penghua ingenuity selection fund, with a record 137.1 billion subscription amount, has become a phenomenon level event of public funds. Wang Zonghe has nearly 5 million fund holders, taking the lead in "going out of the circle".

At the same time, the label of "fundamental investment expert" of Penghua Fund and how this investment core idea will develop in the new market background is also paid close attention to by the market.

This issue of China's capital market development "30 years, 30 people" series dialogue Penghua Fund president Deng Zhaoming.

The public offering industry has huge development space

21st century: how to evaluate the development of the public offering industry in the past 20 years?

Deng Zhaoming: from 1998 to 2002, the scale of the whole fund industry was very small. Since 2002, the development of the industry has been accelerating. At the beginning, we took a step-by-step look, but we didn't expect that the market could be as hot as today. Fund products were issued frequently, setting new subscription records. It can be said that the development of the public fund industry has achieved a good accumulation and a small amount of development.

It is true that the capital market is also developing in the process of continuous exploration. From the perspective of the development history of American capital market, from spontaneous to gradually establishing rules and regulations, continuous cultivation and exploration, we have achieved today's results step by step. In the early stage of the development of China's public funds industry, although the degree of industry identity is not completely consistent, but its infrastructure system construction is very forward-looking in the market environment at that time. Public funds have a high foothold in system design, system design, legal framework and other aspects, which is in line with the development law of the industry, providing a strong guarantee for the steady development of public funds over the years.

The future has come, and the public offering industry is expected to develop greatly. Under the background of China's long-term economic growth, strong financial demand of residents and long-term capital entering the market, the structure of public funds will change greatly, and the proportion of equity funds will be gradually increased. On the one hand, the public is optimistic about the high-quality development of China's economy in the future, and continuously increasing the proportion of equity assets allocation, while the continuous flow of long-term funds into the market will promote the steady development of the capital market; on the other hand, the public funds will guide the public to flow into the entity enterprises with core technology and sustainable value growth potential, and promote through more efficient resource allocation The industrial structure has been optimized, adjusted and upgraded.

21st century: your professional experience is rich and diverse. From university to industrial department, from regulatory department to fund industry, what is the biggest feeling in this way?

Deng Zhaoming: life is an experience and experience. I like to try some innovative things. Every experience is precious wealth in the process of growing up. When I do everything, I find that the common characteristic of successful people is concentration. As long as you focus and devote yourself to everything, you will gain more. As a matter of fact, we have a positive attitude, "three people are bound to have my teacher". We should study and think with a positive attitude, and keep our thinking open, rather than solidifying to a certain limited scope to consider problems. The pattern should be large. At the same time, we should pay attention to the essence and law of things. No matter what thing is, it has its "change" and "unchangeable", but its internal essence has similarities and connections, which need us to learn and learn from.

21st century: in the past 20 years of working in the public fund industry, do you think the new asset management regulations are a typical turning point for the industry?

Deng Zhaoming: the new regulations on asset management promulgated in 2018 have a great impact on the whole asset management industry.

The new regulations bring the whole large asset management industry into a unified regulatory framework, reshape the industry format and optimize the financial system structure. In the past, rigid cashing deviated from the essence of "entrusted and managed by others" of asset management products, increased the financial risks undertaken by the asset management industry, and distorted the relationship between the return level of the real economy and the rate of return on financial investment. Now, the new asset management regulations promote the industry to return to its original source, breaking the rigid exchange and net value management, and the risk return characteristics of products become clear.

With the transparent and standardized investment operation and strict supervision system in the past 20 years, public funds have been widely recognized by investors in the process of transformation of large asset management industry. In the future, public funds will continue to give full play to the advantages of active management ability, and the industry development space is very large. According to the relevant statistics of the people's Bank of China, the proportion of residents' housing assets in total household assets is 59.1%, higher than the United States unified index of 28.5%. However, the allocation of financial assets accounted for only 20.4% of the total household assets, which was 22.1% lower than that of the United States. Among them, the proportion of public funds including equity public offering in asset allocation is lower, and the public offering industry has great potential for future development.

At present, the reform and development of the capital market is comprehensively strengthening the construction of the basic system, especially the reform of the registration system and the improvement of the trading mechanism, the vigorous development of equity funds, the encouragement of long-term capital entering the market, the improvement of the quality of listed companies, and the normalization of delisting, etc., which effectively increases the proportion of direct financing and promotes the healthy development of the multi-level capital market. Public funds can improve the efficiency of financial resource allocation and boost the high-quality economic development through its own professional investment and research ability.

Investment research ability is always the core competitiveness of asset management industry. -Photo by Gan Jun

Investment research ability is the core competitiveness

21st century: what do you think is the core competitiveness of mutual fund companies?

Deng Zhaoming: investment research ability is always the core competitiveness of asset management industry.

We have observed that the public fund industry is continuously strengthening the construction of investment research capacity and constantly improving the investment research level. Through clear long-term assessment, the public fund industry guides the construction of long-term incentive and restraint mechanism, increases equity funds, floating management fee funds, mom products and other innovative varieties characterized by "holding period", enriches the product line of equity funds, and strives to make more investors obtain better income experience through long-term holding with excellent long-term investment performance.

As a public fund manager and professional institutional investor, Penghua Fund has always been based on fundamental investment, adhering to the concept of long-term investment and value investment. In years of investment and research practice, Penghua Fund has established a rigorous, scientific and complete investment and research system, gradually forming a sustainable fundamental investment and research strength, consolidating the foundation of "fundamental investment experts", and based on the continuous creation of value for investors.

21st century: what is the historical trend of fundamental investment in the current market environment?

Deng Zhaoming: from the basic investment trend, there are several directions to be grasped.

First, consumption upgrading. Benefiting from China's future development trend, economic structure transformation and national policy guidance, a large number of diversified and diversified enterprises will emerge from the upgrading of domestic consumption, including in the fields of consumption, health care, education, culture and so on. With the accelerated opening of the financial market, the continuous influx of foreign capital has a strong demand for the allocation of consumer industries with stronger certainty.

Second, technological progress. In the past, many high-end products were monopolized by foreign enterprises. However, with the progress of domestic technology, some excellent enterprises have gradually become stronger and bigger, and their future development is expected. Strategic emerging industries including digital economy, advanced manufacturing, information technology, life and health, new materials, new energy and other strategic emerging industries will benefit from technological progress, and relevant enterprises have the potential for sustainable growth on the new track.

When we are fully aware of the profound changes in the current market ecology, we need to conduct long-term perspective, in-depth research, and independent judgment to deeply cultivate fundamental investment. On the one hand, Penghua Fund adheres to in-depth fundamental research, and the investment research team focuses on the essence of investment and deeply excavates the fundamental value; on the other hand, Penghua Fund adheres to long-term value investment, and the investment decision-making of the investment research team is based on in-depth study of the company's fundamentals, long-term dynamic tracking and observation, rather than short-term market fluctuations. In addition, Penghua Fund adheres to independent research judgment, The company encourages investment researchers to make rational, forward-looking and independent value judgments in various market environments based on in-depth market insight and rigorous data analysis. On the whole, the investment and research team of the company has formed an investment style of low turnover and long-term holding, and the investment target mainly focuses on excellent companies that create long-term value.

21st century: how does Penghua Fund train star fund managers?

Deng Zhaoming: Penghua Fund's "committed to become fundamental investment expert" is not a simple slogan, but has a real connotation and deep meaning - that is, insisting on research to discover value, adhering to in-depth fundamental research, and adhering to independent value judgment.

In the equity investment research team of Penghua Fund, there are not only the "head" fund managers represented by Wang Zonghe and Liang Hao, but also powerful female fund managers such as Chen Xuanmiao, Jiang Xin, Xie Shuying and Wang Haiqing, as well as Mesozoic and Cenozoic fund managers such as Yuan Hang, Meng Hao, Jin Xiaofei, Zhang hang, Lang Chao and Bao Binghua.

In the process of diversification of investment style and innovation of research ideas, golden generation fund managers continue to contribute valuable experience, the new generation of fund managers continuously inject vitality and innovative thinking, and Penghua Fund Equity Investment and research team has gradually formed a generational long-term system of intergenerational inheritance and inclusiveness.

In daily work, we should carry out the long-term comprehensive and thoroughly, pursue the certainty of long-term return, ignore the short-term volatility, reduce the uncertainty of short-term investment of individual stocks through the certainty of long-term investment of portfolio investment. We hope that each fund manager can create long-term sustainable good returns for investors in the establishment, implementation and improvement of their own strategies.

The fund managers of Penghua Fund very much agree with the company's culture and platform value. They are willing to think, share their investment experience, collide with each other and endow each other with energy. The result is bound to achieve "1 + 1 > 2", making all members of the team grow faster.

21st century: how will the public fund industry further improve the stability of excellent investment and research personnel?

Deng Zhaoming: Based on the system design of platform and all-round asset management companies, we implement the strategy of "platform, mechanism and talent", activate the symbiotic system of investment system, and become the incubator and aggregation platform of excellent fund manager talents.

Over the years, the stability of Penghua Fund's core team is relatively good, which has laid an important foundation for the company's sustained and stable operation.

In the long-term construction of investment strength, the good investment and research atmosphere gradually formed by our equity investment research team benefits from the investment research culture of "sharing and co building" of the investment research team. For a long time, the investment research system has been encouraging a culture of sharing and contending, and the value orientation of depth, specialization and simplification. For young people, growth is the most important thing. A good platform can help them accelerate their growth.

Opportunities and challenges in the new historical period

21st century: compared with the development of foreign industries, what are the weaknesses of domestic industry development?

Deng Zhaoming: China's economy has experienced a rapid growth of more than 40 years, and the wealth of residents has rapidly accumulated. In the process of interest rate marketization, residents' awareness of financial management and wealth management has been strengthened, and the allocation of financial products should be gradually increased. At present, China's public fund industry is stepping into a great era of development.

First, the new asset management regulations are gradually implemented. Under the idea of unified supervision, breaking the rigid exchange and clearing the nest, the transformation of net worth is an inevitable trend. At the same time, the policy keynote of "no speculation on housing and housing" has gradually turned investors' vision to the new field of wealth management, bringing new opportunities to large asset management industries including funds.

Public fund is one of the most professional asset management institutions in China. Since the establishment of the first batch of fund management companies in 1998, the professional investment ability has been formed through the institutionalized and scientific investment and research system in the past 22 years, and a good long-term investment return has been created.

In contrast, the United States is the largest market in the global asset management industry, and mutual funds occupy an important position in its capital market and residents' financial management. At the same time, the mature capital market in the United States and the development of mutual fund industry form a mutually reinforcing and promoting relationship. The capital market provides high-quality basic assets for mutual funds and lays the foundation for the mutual fund industry to achieve long-term outstanding performance returns. The rapid development of mutual funds, in turn, will guide residents' wealth allocation in the real economy through the capital market for a long time, and play an increasingly important positive role in corporate governance.

In addition, compared with foreign mature markets, China's capital market is still lack of long-term capital. The holding period of fund investors is still too short to experience the income of the whole public offering fund. The main reason is that the holding period is too short and the turnover rate is high. As long-term funds continue to enter the A-share market, it is very beneficial to the steady and healthy development of the capital market and the public fund industry.

As of the third quarter of 2020, the overall scale of our public offering industry has reached 18 trillion, while the scale of BlackRock, the world's largest asset management group, has exceeded $7.8 trillion. The scale of the world's top 50 asset management companies exceeds US $500 billion, which is larger than any of our domestic public fund management companies. In the future, I believe that China's total asset management ranking will be in line with that of China's economic aggregate. Domestic public offering industry benchmarking and global asset management industry are still relatively backward, with huge development potential and space.

21st century: how to make up for the weakness of the whole industry of public funds?

Deng Zhaoming: compared with the development trend of overseas industries, in the current transition period of China's economic development and the reform period of financial system, we should learn from the experience of the development of American mutual funds, and we need to do the following things well:

First, continue to encourage, support and vigorously develop institutional investors, give full play to the professional advantages of institutional investors, and let more investors share the growth achievements of excellent enterprises. From the perspective of financial management, public funds are an important part of China's inclusive financial system, and public funds will become an important tool to help residents to maintain and increase their wealth in the long-term investment capital market. From the asset side, the public fund industry can select a group of asset management institutions with professional ability through the market-oriented way, guide the residents' wealth to the entity enterprises that meet the economic transformation and development goals, connect social funds and the real economy through the capital market, and improve the efficiency of capital allocation of the whole society.

The second is to enrich the diversified product lines of mutual funds, so as to further stimulate the product innovation vitality of fund companies and improve the flexibility of public fund investment. With the development of the capital market and the maturity of investors' ideas, public funds have the opportunity to develop more flexible products such as infrastructure REITs. On the one hand, it can better meet the diversified investment needs of the capital market and investors, greatly optimize the breadth and depth of the financial system, and support the development of the capital market and national economy; on the other hand, it can provide more abundant products for residents Financial tools, so that it can achieve wealth appreciation through professional investment institutions.

Thirdly, as the core force to promote the future reform of asset management industry, fund companies need to strengthen the pace of digital transformation in various business areas. With the large-scale application of big data, cloud computing and 5g network, the data, computing power and algorithm are all growing explosively and deeply applied. The continuous integration of Finance and Internet, online and offline has driven the asset management industry to accelerate the digital transformation.

21st century: as the earliest joint venture fund company with 49% foreign investment, how do you evaluate the development of China's capital market in the past 30 years?

Deng Zhaoming: in the past 30 years, the rapid development of China's capital market has made remarkable achievements. At the same time, opportunities are often accompanied by challenges.

For China's capital market, the interconnection with the international market will be the general trend. The asset management industry is open to foreign investment. In the short term, there will be some competitive pressure, but in the long run, the test is still the comprehensive ability of investment research and service of each company.

From the past experience of other industries, foreign companies need to effectively combine with local culture to adapt to the local market environment.

In the process of gradual opening up of foreign capital, Chinese companies can also better learn international advanced management experience and methods to improve themselves. It's a good thing in the long run. There are difficulties, but they can be overcome.

At present, for public funds, we should continue to improve the core competence of asset management industry, create stable and sustainable returns for holders, and play a greater role in promoting China's economic transformation and upgrading.

21st century: what is your vision for the future development of China's fund industry and the entire wealth management market in China?

Deng Zhaoming: in the next ten years, we are confident to welcome the golden decade of asset management industry development.

With the continuous promotion of the financial supply side reform, the long-term attractiveness of the capital market continues to improve, and professional investment institutions with strong ability of active investment management have more opportunities to seize the development opportunities.

In the future, with the proportion of pension funds, institutional investors and other long-term funds continue to increase, the capital market as a whole will enter a healthy and benign development cycle. On the other hand, with the increasingly strict supervision, the market pays more and more attention to the value of listed companies, and the pricing of high-quality assets will be increasingly differentiated. Professional institutional investors are expected to find high-quality enterprises with sustainable competitive advantages through in-depth research on company fundamentals. Encouraging the development of equity funds will provide more investors to share the fruits of China's economic development.

It can be seen that China's wealth management institutions are facing great opportunities for win-win cooperation and common development. It is our original intention and mission to construct different asset management institutions, give full play to their differentiated positioning of good development ecology, provide quality services for a larger number of customers and larger scale assets, and realize the continuous growth of wealth value. With the acceleration of opening up, the era of "Dancing" with foreign capital is coming. With the rapid development of wealth management market, fund managers must closely focus on customer needs, always embrace change, and actively innovate and develop in various business areas.

The asset management industry should play an active role in the construction of a new development pattern of "taking the domestic big cycle as the main body and domestic and international dual cycle" promoting each other. At present, China's asset management market has become increasingly diversified. Different asset management institutions have their own characteristics in management system, business philosophy, investment operation and business focus. However, it is a basic requirement of asset management industry to support the development of real economy.

(our reporter Zhou Ying also contributed to this article.)