Analysis: Is it reliable to follow an institution to buy a fund?

Some market views believe that the institutional holding ratio represents the institution's recognition of the fund, and funds with high institutional recognition have a high probability of not being much different. So, what about us ordinary Christians? Today, the editor will share with you whether it is reliable to buy funds from institutions, for your reference only!

Institutional investors, as the name implies, refer to legal entities engaged in securities investment in the financial market, including insurance companies and pension funds , banks, enterprises and institutions, etc. These institutional investors with strong financial resources have usually formed an investment process for screening actively managed funds, and their investment system is much more mature than that of individual investors; at the same time, they require product performance to be robust and sustainable. We calculated the differences in the three dimensions of net value growth, maximum drawdown, and annualized volatility among partial stock hybrid funds held by different institutional investors in the market in the three years of 2018, 2019, and 2020. This is Let’s find out.

Do funds with a high proportion of institutions perform better? We have classified the proportion of institutional investors’ holdings into five levels, namely 0-20%, 20-40%, and 40-60 %, 60-80% and 80-100%. Let’s see which type of fund performs best based on three indicators: net value growth rate, maximum drawdown, and annualized volatility.

Net value growth rate

Net value growth is an indicator that directly reflects the performance of a fund in a certain period of time, and is also one of the indicators that investors are very concerned about.

Based on the data for each of the past three years, we found that the growth of the fund’s net value does not seem to be necessarily related to the proportion of institutional holdings. In the three complete years, it was not the income performance of the product with the highest proportion of institutions. most.

2018: Funds with institutional holding ratios between 60% and 80% performed best

In 2018, the overall market was sluggish, and the average stock-biased hybrid funds fell. Reaching -23.93%. From the perspective of funds held by different institutions, funds with holding ratios between 60% and 80% have an average decline of -19.94%, which outperforms funds with other ratios; while funds with holding ratios between 0% and 20% have an average decline of -19.94%. Among the funds, the average decline was the largest, -24.80%.

2019: Funds with institutional holding ratios between 40% and 60% performed the best

In 2019, the equity market has a significant profit-making effect, with partial stock hybrid funds averaging The return was 45.10%. Among them, funds with institutional holding ratios between 40% and 60% had the highest average return of 47.23%. In comparison, funds with holding ratios between 80% and 100% performed poorly. , the average return is only 40.53%.

2020: Funds with institutional holding ratios between 20% and 40% performed best

In 2020, A-shares withstood the impact of the COVID-19 epidemic. Fluctuating upward, the average return of stock-biased hybrid funds is as high as 58.48%. Among them, funds with institutional holding ratios between 20% and 40% have the best performance, with an average increase of 63.85%. Funds with holding ratios between 80% and 100% still performed mediocre in 2020, with an average return of only 43.97%.

Maximum Drawdown

To put it simply, the maximum drawdown describes the decline of the fund from the highest point to the lowest point in price (net value). This indicator can well reflect the fund's risk control capabilities and can also help investors understand the maximum loss faced by the fund.

Judging from the three complete years of 2018, 2019, and 2020, funds with a higher proportion of institutional holdings have smaller average maximum drawdowns, and the trend in 2018 is more obvious. As we all know, the market was in gloom throughout 2018. It can be seen that in the volatile and falling market, funds with a higher proportion of institutional holdings are also more resilient.

Annualized volatility

Let’s look at the last indicator, annualized volatility, which is used to measure the volatility risk of the fund portfolio and can reflect the risk of the fund portfolio to a certain extent. stability.

Statistical results show that in the above three years, the fund with the highest proportion held by institutional investors has the smallest average annualized volatility; while the holding proportion is between 0% and 20% and between 20% and 40% Among the funds, the annualized volatility level is higher.

However, we need to dialectically see the indicator of annualized volatility. Annualized volatility is not entirely equal to risk. For example, Fund A's annualized volatility is very large, but the volatility remains upward and the returns are good; while Fund B's annualized volatility is very small, but its returns remain sideways, which is not good either.

On the whole, the proportion of institutional investors holding does not directly reflect the quality of product returns; however, judging from the above statistical results, the higher the proportion of institutional investors holding funds, the better the performance More stable, investors’ holding experience may be better.

Be wary of potential risks when buying funds from institutions

If a fund is held by institutional investors, it is a good thing, at least it means that the fund's performance is relatively stable.