active management ability leads the industry, why do you get involved in passive investment?

Dongfanghong Asset Management, which is good at equity investment, will soon sell a "smart beta" (also known as factor investment) strategic product between active management and passive investment to the whole market, which adds another fire to the recently popular index funds.

Recently, SSE interviewed Xu Xijia, deputy general manager (presiding) of Dongfanghong Asset Management Public Offering Index and Multi-strategy Department, who will be the fund manager of the newly launched Dongfanghong CSI Competitiveness Index product.

"Smart Beta" investment strategy is imported, which has matured in overseas markets, and most investors can obtain clear factor returns at a lower cost. Although it was introduced into China as early as 1 years ago, the development of smart beta in the domestic market is slightly slow.

However, with the increasing proportion of institutional investors, market pricing is becoming more rational. Many domestic asset management institutions, while consolidating their ability to obtain Alpha excess returns, have also begun to focus on smart index products and earn sustainable Beta returns.

launching smart beta products with ROE (return on net assets) as the main factor is another new action of Dongfanghong asset management. Xu Xijia said that based on years of practical experience, the team refined the logic of value investment and incorporated it into the compilation of smart beta index, and selected competitive good companies in the industry in a disciplined and standardized manner, without deliberately choosing the right time, and committed to being a smart index with excess returns.

In reality, different smart beta products have different investment strategies. What kind of factors are selected to test the "active management" ability of the investment research team? At present, the popular factors include dividend, valuation, quality, growth, momentum and so on. These factors can be used alone or in combination, and the effects vary widely.

value strategy is one of the most recognized strategies in the market at present, including consideration of both valuation factors and quality factors. Among them, ROE index is the most favored by investment institutions. Buffett believes that if only one indicator can be used to judge the quality of a company, this indicator is ROE.

in terms of different industries, the utility of factors can be large or small, and some factors are particularly effective in some industries and relatively mediocre in others. According to the analysis of Dongfanghong research team, the degree of discrimination of ROE indicators in most industries is significant.

many researches and analyses point out that most enterprises with high ROE will have such characteristics: they are always superior in management, organization and product research and development, and have the first-Mover advantage. With the intensification of industrial competition, companies with a large decline in ROE level will withdraw from the market because they are unprofitable, and the profitability of high ROE enterprises will be further consolidated or even improved.

It is understood that in 218, the Dongfanghong Investment Research Team began to research and compile the CSI Dongfanghong Competitiveness Index. The index takes the sample stocks of CSI 8 Index as the sample space, and selects the stocks of listed companies with the highest return on net assets in various industries to form sample stocks.

It is worth mentioning that the index "Excellence is the best" ranks the ratio of the total historical non-net profit of individual stocks in each industry to the average net assets, and selects the top 2% of individual stocks in each industry as the sample to be selected. At the same time, in each industry, the samples to be selected with negative year-on-year growth of non-net profit in the past year are excluded, and the remaining samples are regarded as sample stocks.

why is the sample space selected according to CSI 8 instead of the traditional CSI 3 or CSI 5? Xu Xijia said that if the range is limited to 3 or 5 indexes, some industries will inevitably be excluded or there will be a big deviation in market value in the process of compiling indexes.

Extension of rights management ability

Based on the current time and the extension of the original advantages, it will be a beneficial exploration for Dongfanghong to lay out a smart beta product.

Unlike general index funds that only track a broad-based index or industry index, smart beta funds use a long-term proven investment strategy as the basis to form factor indicators and select stocks accordingly.

Smart Beta replicates the more certain benefits of active investment, and its initiative is more reflected in the periodic adjustment of constituent stocks in the early design and operation of products. In recent years, with the resurgence of market value investment, Dongfanghong's equity investment has shown good medium and long-term performance. Xu Xijia told the Shanghai Stock Exchange that in this process, the investment research team has been thinking about refining some valuable judgments into standardized rules as an extension of active management capabilities.

"The mechanism of the survival of the fittest in the capital market is playing a role, and the effect of the strong is increasingly consolidated. The market environment is becoming more benign, which is more beneficial to the development of products such as Smart Beta in China. " Xu Xijia said that factor products that have been proved to be relatively effective in past product operation practice, supported by theory and consistent with Dongfanghong's value investment concept will consider layout in the future.

"Different companies will have different compilation rules, and everyone's understanding of factors is also different. Summarizing the investment experience of Dongfanghong, we have our own unique advantages in selecting individual stocks. Quantifying the factor selection will pay more attention to quality factors like ROE. "

"In the future layout, no matter whether a single major factor or a combination of multiple factors is selected to compile the index, the quality factor will be considered. Because this is the existing advantage of our investment and the result of long-term accumulation. " Xu Xijia said that Dongfanghong will combine the comprehensive layout of its own advantages to make the distinction between smart indexes and product characteristics.

He told the Shanghai Stock Exchange that customers' needs are also diversified. For investors, the rich product line of Smart Beta Index will optimize asset allocation and provide more investment options.

source: shanghai securities news.