Yinhua ** stable investment team leader, ** manager Kan Lei.
With the intensification of market volatility and multiple factors such as financial substitution, fixed income products such as bonds** have continued to be chased by funds in recent years.
Needless to say, there are tens of billions of stock products, even new products with a scale of 8 billion frequently appear. However, due to multi-dimensional demands such as financial substitution and asset allocation, bond investment will put forward higher requirements for managers.
Kan Lei, head of Yinhua's stable investment team and manager, said in a recent interview with a Chinese reporter from a brokerage firm that there is also an "impossible triangle" in bond investment, which requires a trade-off between yield, volatility and liquidity. Not only that, with the increase in the net-worth requirements of the new asset management regulations, the net-worth valuation also puts forward higher requirements in terms of volatility. Therefore, he believes that bond investment should be based on taking into account yield, volatility and liquidity, and output products with a certain market capacity and controllable drawdown, so as to provide investors with a clear positioning of product choices.
Based on years of experience, Kan Lei said that he will further refine the framework, add dimensional indicators such as duration, leverage, and derivatives (such as treasury bonds**), and gradually introduce auxiliary methods such as quantitative models to capture bonds in 2024**. He believes that "the policy is active, the economic twists and turns repair" will be the main trend in 2024, the bond market in the economic twists and turns, there is still room for interest rate cuts in the future, and institutional behavior "large banks lack of debt, small banks lack of assets" Driven by the characteristics of medium-term interest rates, short-term negative factors may provide the best opportunities.
Nearly 15 years of experience to refine the "top-down" framework
Kan Lei is a market veteran with nearly 15 years of experience, before joining Yinhua** in February 2023, he had experience in insurance asset management and public offering**, working in Chinese Life Asset Management, Industrial **, China Life Security** and other institutions.
According to Kan Lei, he directly joined Chinese Life Asset Management after graduating in 2009 and was one of the company's first batch of fresh graduates. "At that time, I was assigned to the fixed income department, where I not only did the primary and secondary bond business, but also did deposit, non-standard and other related fixed income business. ”
In 2015, Kan Lei joined Industrial **, mainly engaged in large-scale asset allocation, FOF and fixed income business. In 2018, Kan Lei returned to the Chinese Life Department and went to China Life Security**, a subsidiary of Chinese Life, to do bond investment, and the management products covered various fixed income products such as short- and medium-term bonds**, medium- and long-term bonds**, first-class bonds, and partial debts.
In February 2023, Kan Lei joined Yinhua** and is currently serving as the manager of Yinhua**'s fixed income and asset allocation department, with 6 products under management, with a total scale of about 10.7 billion yuan according to the 2023** quarterly report. The Yinhua Jingxin Bond**, which began to be issued on February 26, 2024, is the 9th bond managed by Kan Lei's team**.
Kan Lei bluntly said that it was these experiences that allowed him to establish a complete bond investment framework. Taking the fundamental analysis of individual securities as an example, he said that the "top-down" framework includes three parts: first, the analysis of macro background factors, involving economic fundamentals, market liquidity, capital supply and demand, etc.; the second is the meso-industrial trend, including the comparison of interest rate spreads, curve shape, curve structure, etc.; Finally, there is the micro aspect of the price comparison of individual bonds and the linkage of the primary and secondary markets.
As the market continues to develop, I will further refine the framework, and will add dimension indicators such as duration, leverage, and derivatives (such as treasury bonds**), and achieve it through two paths: one is to make the entire framework into automatically updated charts and models, and realize analysis through intuitive judgment, quantile judgment, and percentage judgment. The second is the gradual introduction of quantitative models, especially the calculation of macro indicators, macro and bond pricing models by some quantitative models. Kan Lei said.
Portfolio duration will not be over-manipulated to cater to drawdowns
Of course, the investment research framework is only a necessary foundation for bond investment. In Kan Lei's view, excellent bond investment should not only be familiar with the investment side, but also grasp the financial needs of the market, and output products that "investors really want" by harmonizing the supply of bond products. From this point of view, Kan Lei has a strong product thinking, he is not only an excellent manager, but also a product manager who has insight into the needs of investors.
"I have been managing short- and medium-term debt since 2019, and my biggest lesson is to respect common sense. Kan Lei said that bond investment needs to choose between yield, volatility and liquidity, just like "you can't have both", in the normal bond market environment, there is no short and medium term bonds or short bonds with high yields, small drawdowns, and good liquidity**. In addition, with the increase of the net-worth requirements of the new asset management regulations, the net-worth valuation puts forward higher requirements for ** managers in terms of volatility, and the supply of bond products needs to take into account the yield, volatility and liquidity, so as to provide investors with a clear positioning of product choices.
Based on this, Kan Lei proposed that bond investment should be based on taking into account yield, volatility and liquidity, and output first-class products with certain market capacity and controllable drawdown. This is the product positioning of short-term debt and short- and medium-term debt** managed by his team.
Kan Lei specifically analyzed that the so-called has a certain market capacity, and the scale and volume of the product can not only undertake the daily entry and exit of investors with a certain size, but also meet the investment demands of scattered funds in the channel. In order to achieve this purpose, the overall bond focuses on medium and high-grade credit bonds and interest rate bonds, and only carries out credit sinking during certain periods to maintain good liquidity of the portfolio. Medium and high-grade credit bonds focus on riding returns, and exchange term spreads for grade spreads. Dynamic price comparison between medium and high-grade credit bonds and interest rate bonds may enhance portfolio liquidity at low yields. Dynamic price comparison between medium and high-grade credit bonds, and daily observation and adjustment of portfolio positions. Some** short-term bonds hold to maturity to cope with unforeseen sudden redemptions.
In order to achieve controllable drawdown, Kan Lei believes that it is necessary to minimize the drawdown as much as possible under the comprehensive consideration of product yield, volatility and liquidity. However, we will not inappropriately manipulate the portfolio duration and leverage in order to blindly cater to the drawdown, and at the same time do not overemphasize the timing, and strive to make customers get a better holding experience. "What we pursue is that the overall drawdown is controllable, which is the result of both earnings and drawdowns. "On the basis of controlling the drawdown, we will further fully obtain the term spread and grade spread, and obtain coupon and riding income.
The bond market is expected to regain strength in 2024
When talking about the prediction of bonds in 2024, Kan Lei bluntly said that "active policy efforts and economic tortuous repair" will be the main trend in 2024.
Since the second half of 2023, a package of stable growth policies has been promoted, especially the increase in deficit has clearly conveyed the attitude of increasing leverage, and it is expected that fiscal policy will turn more active in 2024. However, the effect of the policy remains to be observed, the negative feedback pressure on real estate supply and demand is still there, the confidence and expectations of market players are still weak, and the lack of endogenous economic momentum has not been fundamentally reversed, and the economy is more likely to be tortuously repaired in 2024. Kan Lei said.
Kan Lei believes that in 2024, the bond market will be driven by the twists and turns of the economy, there is still room for interest rate cuts in the future, and the characteristics of institutional behavior of "large banks lack of liabilities and small banks lack of assets", and medium-term interest rates will still tend to decline, and the adjustment pressure brought by short-term negative factors may provide the best opportunities. Kan Lei specifically gave the following three characteristics:
First, although the willingness of the policy to stabilize growth has begun to strengthen, the effect of the policy remains to be observed, the lack of endogenous economic momentum has not been fundamentally reversed, and the economy is more likely to be repaired in 2024, and the fundamentals still bring certain opportunities to the bond market;
Second, the current inflation is weak, the real interest rate is high, the decision-makers' requirements for monetary policy easing have not changed, and there is still room and possibility for further interest rate cuts in the future.
Third, the mismatch of debt and credit resources will be resolved, so that in 2024, institutional behavior may show a more obvious "lack of debt of large banks, lack of assets of small banks", and the allocation institutions represented by rural commercial banks still have greater pressure on bond allocation, and the demand of the bond market is still relatively favorable. Therefore, in the medium term, interest rates still tend to decline, but volatility may increase, and it is necessary to seize opportunities in the volatility. At present, most varieties, especially the short-end absolute yield, have been adjusted to a higher level, the allocation value is highlighted, and the short-term adjustment pressure provides a more adequate opportunity.
In terms of specific varieties, Kan Lei focused on the analysis of short- and medium-term bonds. He said that the risk-return characteristics of short- and medium-term bonds** are between currency** and ordinary bonds**, which are suitable for idle money investment. Compared with currency**, ultra-short-term bonds** and short-term bonds**, the investment scope of short- and medium-term bonds** has been significantly broadened and the strategies are more abundant.
Wind data shows that between 2018 and 2023, both the short-term and medium- and long-term pure bond** indices have achieved positive returns over the years, while the *** index has shown significant volatility. For example, in 2019, the *** index rose by 4703%, short-term and medium- and long-term pure bond ** indices edged up 349% and 433%；And in 2023 ** type *** 1168%, short-term and medium- and long-term pure debt ** index still realized**, with an increase of 327% and 361%。
Editor-in-charge: Luo Xiaoxia.
Proofreading: Su Huanwen.