The FOF market in the United States is the most mature market for FOF funds. Therefore, the current development of FOF in the United States has a good reference significance and value for the future development of FOF in China. In terms of product forms, if classified by managers and fund investments, the common product forms of publicly offered FOF in the United States can be divided into the following four categories, including:
Internal manager+own fund portfolio
Internal Manager+Market Fund Portfolio
External investment+self-owned fund combination
External investment+market fund portfolio
Let's introduce these four product combination modes in detail.
1, internal manager+own fund portfolio
The first product form we want to introduce is the form of "internal manager+own fund portfolio". Before understanding its form, let's first understand the connotation of portfolio: internal manager+self-owned fund portfolio refers to the mode that the issued FOF is managed by its own fund company and the FOF fund invests in the products issued by its own fund company.
Generally, large fund companies will adopt this product portfolio form, because only large fund companies can issue enough funds for FOF to choose from. At present, Pioneer Group, as the first of the three major FOF fund companies in the United States, has enough rich and diverse funds to meet the construction of FOF fund pool.
Another advantage of this product form is that it can reduce the cost: the problem of double fees for FOF funds has been criticized, and the combination of internal managers and free funds can give customers more preferential fees. FOF's three leading public offerings in the United States, including Pioneer Group, Fidelity Group and Puxin Group, all adopt the model that the parent fund has zero fees and the sub-funds only charge management fees.
2. Internal Manager+Market Fund Portfolio
The second product form to be launched by Xuanjia Finance is the combination of internal managers and market funds. This form means that the fund company itself acts as the manager of FOF, but the investment object of FOF is no longer limited to the products issued by its own fund company, and the investment object is all funds in the whole market.
Using this product portfolio model, we can choose more high-quality funds in the whole market, pursue more stable or even excess returns, and avoid the moral hazard implied by internal funds. Judging from the current market, institutions with mature and high-quality customer groups generally adopt this product form.
However, the shortcomings of this product form are also obvious, and it is difficult to avoid the problem of repeated charges by adopting this form. Therefore, in terms of absolute quantity, there are not many FOF in this form on the market.
3. External investment+self-owned fund combination
The third product combination form we want to introduce is foreign investment+self-owned capital combination form. The investment object of this form of FOF is the fund within the fund company, but the design and portfolio construction of FOF is the responsibility of external investment consultants.
The FOF fund in the form of product portfolio has a great advantage: if the issuing company lacks the ability to allocate FOF, it can give full play to the professional allocation advantages of foreign investment and realize complementarity. For example, PIMCO, a subsidiary of PIMCO, invests in all the asset funds of PIMCO, because PIMCO has natural advantages in active management, but its tactical asset allocation strategy is external investment research.
The subsidiary company is established because the latter is more professional in the field of asset allocation, combining the advantages of active management of free funds and the advantages of external investors in asset allocation to create higher value for customers.
Judging from the development trend of the market in recent years, this way of strong alliance can realize more optimized resource allocation, and the mode of combining external investment with self-owned funds has also been welcomed by managers. According to Morningstar data, more than half of f of uses a combination of external investment and its own funds.
4. External investment+market fund portfolio
The fourth product combination form we want to introduce is the combination form of external investment and market funds. Companies that implement this product form are generally companies that do not have their own funds or have weak active capital management ability and are not prominent in asset allocation, but they have a strong channel advantage, such as large banks or insurance companies. There is no problem with their capital flow, but the professionalism of active management and asset allocation is not outstanding.
For banks and insurance companies, the nature of funds is relatively stable, while FOF with dual insurance functions has natural advantages. For example, Wells Fargo's advantage absolute return fund is all invested in a FOF—GMO non-reference benchmark allocation fund managed by GMO, and then FOF is further invested in other funds under GMO. Generally speaking, Wells Fargo has outsourced all FOF to GMO.
After decades of development, the FOF market in the United States has formed a relatively complete FOF industrial chain with complementary advantages. As far as the current market is concerned, the market has a pioneer group with all-round industrial chain; There is also the integration of banks or insurance companies with channel advantages; There are also professional investment institutions such as Morningstar and GMO, and the industrial chain is not only highly subdivided but also complete.
Understanding the form of FOF products can help investors to know more about the operation mode of products when they have enough purchases, and also provide reference for the future development of FOF in China. After all, only by standing on the shoulders of giants can we see farther and take fewer detours.