Long-term funds boost ETF inflows: What's the signal?

• Article
• 2024-05-30
• 17 Comments

Whether it's the CSI 300 or the SSE 50, these traditional indices not only welcomed new ETF issuances this year, but also saw the emergence of institutional figures such as corporate annuities and occupational annuity plans among the top ten holders before listing.

Industry insiders have indicated that this is a new change in the trend of "institutionalization" of ETFs: the main force of institutional investors in broad-based ETFs is expanding from securities firms and private equity to annuities and insurance funds, which have been involved in the new issuance phase of ETFs, becoming another source of medium to long-term capital similar to central financial institutions.

These institutions have recently favored large-cap blue-chip assets, including high dividend and bonus assets.

Public funds analysis suggests that the profit side of dividend assets may benefit from the overseas interest rate cuts in the second half of this year, but there is a preference for cyclical dividend assets over stable dividend assets within the dividend assets.

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According to the announcement by China Merchants Fund, the China Merchants CSI 300 ETF, which was established on September 6, will be listed and traded on the Shanghai Stock Exchange on September 20.

The ETF's listing announcement shows that among the 586 million shares to be listed, 457 million shares are held by institutional investors, accounting for 77.91%.

Among the top ten holders, in addition to common institutions such as securities firms, corporate annuities and occupational annuity plans have also emerged.

Specifically, the largest holding institution is China Merchants Securities, holding 200 million shares, accounting for 34.11%, and the third to eighth holders are all annuity plans, including CITIC Group Co., Ltd. Corporate Annuity Plan, Guangdong Province No.4 Occupational Annuity Plan, Jiangsu Province No.7 Occupational Annuity Plan, Guangdong Province No.5 Occupational Annuity Plan, China United Network Communications Group Co., Ltd. Corporate Annuity Plan, Guangxi Zhuang Autonomous Region No.7 Occupational Annuity Plan.

Together with the tenth largest holder, Sichuan Province No.7 Occupational Annuity Plan, these seven corporate annuity plans have subscribed to a total of 101 million shares, with a combined holding ratio of about 17.24%.

Similarly, the Xinhua CSI Dividend Low Volatility ETF, which was listed and traded on September 20, has the top ten holders mainly consisting of insurance institutions.

Among them, Ping An Property Insurance, Hong Kang Life, and Tongfang Global Life, three insurance companies, hold a combined share ratio of over 16%.

In addition, the Tianhong SSE 50 ETF, which was listed and traded on September 13, has six out of the top ten holders as institutional investors.

Among them, Shanghai HeXi Private Equity Fund's HeXi Alpha No.1 Private Equity Securities Investment Fund holds a ratio of 14.08%.

Shanghai Securities - Guojun Asset Management 3189FOF Single Asset Management Plan - Shanghai Securities Escort FOF Single Asset Management Plan and Founder Futures hold a ratio of 8.45% and 5.63% respectively.

In addition, the Silver Hua Hong Kong Stock Connect High Dividend Investment ETF, which was listed and traded on September 2 this year, also has the top ten institutions mainly consisting of private equity, with only five seats occupied by products related to Xun Yuan Asset Management (Shanghai) Co., Ltd. and Shanghai Oak Pine Asset Management Co., Ltd.

The net value of corporate annuity funds has exceeded 3 trillion yuan.

In the view of industry insiders, the recent concentration of institutions among the top ten holders of newly listed ETFs indicates that the investment value of core broad-based ETFs is becoming increasingly prominent.

In particular, the dense "positioning" of medium to long-term funds such as corporate annuities and occupational annuities in broad-based ETFs is more cost-effective.

A public fund research and investment person in the north told the reporter of Securities China that the trend of "institutionalization" of ETFs in recent years is quite obvious, and the traditional investment institutions that were previously focused on by the market were securities firms and private equity.

However, since 2023, the trend of institutions such as corporate annuities or central financial institutions purchasing mainstream broad-based ETFs has become more prominent.

In the previous fund quarterly or semi-annual reports, the ones that increased positions in broad-based products such as CSI 300 ETF were mostly central financial institutions.

Looking at the recent new issuance of CSI 300 ETF and others, institutions such as corporate annuities have been involved in the new issuance phase.

Data shows that as of the end of the second quarter, there were a total of 54 corporate annuity portfolios in the market that bought non-cash ETFs, holding 81 non-cash ETFs, with a holding market value of 1.971 billion yuan, and the holding market value at the beginning of the year was about 1.33 billion yuan, with an increase of nearly 50% in the first half of the year.

Among them, the top holders of market value are ICBC Corporate Annuity Plan, PetroChina Corporate Annuity Plan, and ABC Corporate Annuity Plan, with holding market values of 692 million yuan, 254 million yuan, and 175 million yuan respectively.

Data from the Ministry of Human Resources and Social Security shows that as of the end of the first quarter of this year, the net value of investment assets of the national corporate annuity fund was about 3.25 trillion yuan, with 5,677 combinations established.

In the first quarter of this year, the investment income of corporate annuities was 29.435 billion yuan, with a weighted average return rate of 0.96%.

Looking at the complete year, from 2007 to 2023, the average annual return of the national corporate annuity fund was 6.26%, and except for a few years with losses, most years maintained good returns.

From the perspective of the underlying assets held in broad-based ETFs, these institutions have recently favored large-cap blue-chip assets, including high dividend and bonus assets.

Public fund analysis shows that after the previous phased adjustments, high dividend bonus assets have good investment value.

Huaxia Fund told the reporter of Securities China that the recent performance of dividend assets can be divided into, first, a trend formed by the gradual "grouping" of configuration-type investors, and then the "midway boarding" of transaction-type investors, which has amplified the price change range of dividend assets.

From a medium to long-term configuration perspective, the underlying logic of dividend assets driven by configuration demand has not changed significantly.

With the domestic economy continuing to repair, profits tend to be low-speed and low-voltage, and dividend assets, with strong certainty, are expected to continue to attract attention.

In addition, with the deepening reform of the capital market, encouraging higher dividends, and the entry of incremental funds from institutions such as insurance and public passive ETFs, especially in the banking sector, there is still room for increased allocation, which means that the long-term value of dividend investment is still highly worth paying attention to.

Fang Shenshen, the fund manager of the Central European Hong Kong Stock Connect Central Enterprise Dividend Index Fund, said that the current economic growth rate is still highly uncertain, and dividend-type enterprises that can provide relatively stable cash flow have a relative advantage.

Coupled with the new "Nine Articles" and the market value management demands of central enterprises, the dividend willingness of these enterprises may be more prominent.

Stable cash flow, strong dividend willingness, these two advantages of dividend assets make them the preferred quality ballast stone-type configuration assets for investors.

"Domestic economic fiscal policy is expected to further exert force in the second half of this year and next year, thereby improving total demand.

However, in the long run, dividend assets will prefer cyclical dividend assets over stable dividend assets," Zhuang Tengfei, deputy general manager of the macro strategy investment department, chief strategist, and fund manager of Manulife Fund, analyzed to the reporter of Securities China, saying that first, the profit side of cyclical dividend assets may benefit from the overseas interest rate cuts in the second half of this year, and the overall probability of commodity prices remaining at high levels is high.

The overseas interest rate cut process and the evolution of the global monetary system will be relatively important macro variables in the future; secondly, when the market shares the dividend asset revaluation in the process of the gradual decline of the long-term long-end interest rate center in the territory, it still has to face the risk of the impact of the phased rise of long-term interest rates.

The stable dividend assets with bond-like attributes lack effective coping ability, and in this regard, cyclical dividend assets have significant advantages over stable dividend assets.