In mature capital markets, FOF already accounts for more than 20% of the entire hedge fund scale. However, in my country, FOF has just started and there is huge market space in the future. Behind every product there is its operating mechanism and process. So, what is the operating process of FOF?
FOF’s operational process mainly includes five major aspects, including product design, strategy setting, product release, product operation and after-sales service. Now Xuanjia Financial will talk to you one by one.
▍Process 1: Product Design
Product design reflects the positioning and direction of FOF in the market, as well as the characteristics of FOF itself. In other words, the design of FOF products gives full play to its inherent advantages in asset allocation. Therefore, a truly good FOF product should be outstanding in asset allocation concepts and strategies.
As an allocation investment tool, FOF products also fully reflect the characteristics of returns and risks. Its investment strategy is to conduct higher-level portfolio investments on the basis of funds, so that Non-systematic risks of assets are further reduced, providing dual and professional management to obtain excess returns.
▍Process 2: Strategy Setting
In the direction of product strategy setting, FOF mainly configures from the following three levels. First, it is the allocation of large categories of assets, and then the allocation of category assets. Finally we get to the specific varieties. Therefore, unlike the direct investment of various types of private equity funds, the design of FOF products better reflects the balance between risks and returns of assets.
The first level is the allocation of large categories of assets, including stocks, bonds, real estate, bank deposits, etc., based on macro analysis and prediction, product positioning is made according to the current market environment, and timely adjustments are made to market changes The direction of asset allocation.
The second level is category assets, which are asset classifications between specific types and broad categories of assets, such as blue-chip stocks in stocks, shops, residences in real estate, etc., corporate bonds, government bonds in bonds, etc. Debt and so on.
The third level is specific investment varieties. Based on the allocation of major asset classes and the direction set by the asset class, excellent funds in each subdivision are then selected for cooperation.
According to the operation mode of the FOF parent fund and the types of sub-funds it invests, FOF products can be divided into four types, including actively managed funds (AFOAF, IFOAF), passively managed funds of funds (IFOAF, IFOIF).
▍Process Three: Product Issuance
Product issuance is an important link in the operation of each fund product, but on July 15, 2016, the "Measures for the Management of Private Investment Fund Raising Behavior" After its implementation, there are clearer and more detailed regulations on product distribution than in the past.
The management measures cover many key points, including the prohibition of public promotion of private equity products and performance, product promotion to specific targets, the issuance of qualified investor certificates, and return visits by non-sales personnel to confirm investor wishes, etc.
▍Process 4: Product Operation
After the product is released, the next step is the operation of the product. Different from the specific investment varieties, the product operation of the FOF fund has three steps, which are strictly screened and This achieves the purpose of maintaining and increasing asset value.
The first step is to use big data qualitative and quantitative analysis to rank market securities, futures, bonds and other varieties according to published performance, and then based on performance ranking, performance stability, performance source, Factors such as position concentration, position fluctuation, and maximum drawdown are used to comprehensively measure the investment target.
The second step is to screen out investment targets. The next step is to have an in-depth understanding of all aspects of the company. First, conduct in-depth interviews and communications with the company's fund managers to gain a deeper understanding of the fund managers' origins and background, as well as their personal investment philosophy, style, personality traits, preferences, focus and ethics; secondly, make a comprehensive review of other aspects of the company Conduct a comprehensive inspection and evaluation, including investment research capabilities, team stability, assessment and incentive mechanisms, company culture, etc.
The third step is to conduct a comprehensive assessment of the company’s risk control system. Why should company risk control be listed separately? Because risk control is always the first rule of market survival. If risk control is not good, then there is greater uncertainty hidden behind high returns. The risk exposures behind different products are different, and investors must also think clearly about whether the returns are sustainable. In terms of investment structure, some companies allocate more than half of their funds to value-based targets and 20% of their funds to aggressive targets. For some companies, the opposite is true. Then investors need to do some research on the risks hidden by each company. Make a comprehensive assessment and finally select the company that suits you.
After screening through the above three steps, the next step is to build a portfolio, select high-quality funds according to the direction set by your own product design, and then allocate them under the risk control system.
▍Process 5: After-sales service
After-sales service is an indispensable part of the FOF operation process. It is important for strengthening communication and exchanges with customers and promoting mutual understanding. Trust has a positive meaning.
For example, Xinpi.
Although the regulatory authorities have no explicit regulations or mandatory requirements for the information disclosure of private equity funds, funds can choose to disclose the latest relevant information such as product net value accurately, standardly, and timely, but good credit approval can enhance investor confidence; in addition, During the operation of FOF, we provide customers with complete technical support to eliminate valuation delays or frequent errors.
The above are the five major operating processes of the FOF fund.
Due to the short history of my country's FOF funds, there are still some problems in the operation process of FOF. For example, in product design, the positioning is not clear; in portfolio management, there are phenomena such as chasing the rise and killing the fall, resulting in FOF Performance fluctuates greatly. In terms of product issuance, there are problems such as improper marketing and inconsistent charging standards; in terms of product operation, there are problems such as similar investment targets, unscientific portfolio management, and loose risk control. In terms of after-sales service, there is insufficient technical support and information disclosure. Irregularities and other issues.
However, with the development of FOF, the problems existing in its operational processes will also be solved. Private FOFs that adhere to the right path, are sincere and have high business standards will undoubtedly stand out and go further. Far.