Since last year, the relevant authorities have strengthened the supervision of money market funds, including requiring them to diversify their investments, and the share held by individual fund holders should not exceed a certain proportion. The purpose is to prevent risks in the operation of the money market, especially in redemption, and maintain normal liquidity. Not long ago, the relevant departments stipulated that the daily withdrawal of T+0 model of money market fund holders should not exceed 1 10,000 yuan, which is obviously weakening its function as a "quasi-currency". Obviously, judging from this series of actions taken by the regulatory authorities, we attach great importance to the problems brought about by the rapid development of money market funds and are taking effective measures to solve them.
In other words, from a certain point of view, it makes sense. After all, when these funds started to open positions, the stock market had already experienced some fatigue. On the one hand, those funds with heavy blue-chip stocks do not have much advantage in P/E ratio because the price of blue-chip stocks is not low. On the other hand, due to the stagflation of blue-chip stocks, people are not very optimistic about their market outlook. In this way, for the newly established FOF, it should not be too radical to ensure a smooth start. At this moment, it should be logical to choose money market funds with relatively small risks and good returns.
But the problem is that although the risk of money market funds investing in products is indeed limited, there are too many funds invested in it in society. Once these funds are redeemed centrally, the resulting shock cannot be underestimated. Especially for a large-scale FOF, if the money market funds bought are relatively concentrated, when the FOF itself encounters large redemption, the pressure will naturally shift to the money market funds, and once a money market fund has redemption risk, it will hurt the entire securities market and bring very adverse effects to society. From this perspective, FOF's large purchase of money market funds may become a more uncertain source of risk. Now it is obviously necessary for the regulatory authorities to take precautions and make clear restrictions on FOF's purchase of money market funds.
In addition, it is also mentioned that the original intention of developing FOF is to optimize asset allocation and further play the role of fund diversification and rational investment. If FOF invests a lot of money in money market funds with little individual difference, it will be difficult to really play the role of professional investment and diversified investment. Moreover, money market funds are held too intensively by large funds, which is not very beneficial to their steady operation. Therefore, from the investment point of view, money market funds may not be suitable for FOF intervention. Furthermore, if FOF invests heavily in money market funds, it may also lead to the transfer of interests between FOFs and make the fund operation fall into a de facto self-circulation, which is unfair to the holders and unfavorable to FOF and money market funds.
It should be said that China's FOF is still in its infancy, and buying money market funds in large quantities is still in its infancy, although it was once obvious. Now it is necessary for the regulatory authorities to make policy adjustments in some aspects according to market practices and risk assessment, which is also a preventive measure. At the same time, it also enlightens people that any kind of financial innovation should have detailed and strict certification, so as to avoid detours and move forward smoothly in the promotion and development. In this context, FOF was born. Interestingly, in the first batch of FOFs, several of them mainly took money market funds as positions, and even more than 70% of the funds were invested in money market funds.