In 8 trading days, 17 products were sold out.
On November 3rd, Penghua Value Selection Active Management ETF announced the early conclusion of its fundraising. With this, out of the initial batch of 18 active funds, only CCB Balanced Selection Active Management ETF is still in the fundraising phase, with a total raised amount exceeding 35 billion yuan. From the approval on October 19th to the near completion of fundraising today, it has taken less than two weeks.
As the fundraising wave subsides, the pace of building positions has become the new focus of the market. On the evening before last, a responsible official from the China Securities Regulatory Commission (CSRC) clearly stated in response to reporters' questions about stabilizing the market and expectations that they would guide and encourage the 18 companies that have completed fundraising to accelerate their investment and position-building activities.
As of now, for the 12 products that have been announced and established, more than 220,000 households have participated in the subscription, with the number of subscribers for some individual products exceeding 20,000. According to Yicai, the products that are progressing faster have already begun to build their positions. Some fund managers have revealed that they will build their positions in batches, taking into account the market conditions, in order to smoothly navigate through the position-building period.
"In the past, in the minds of most investors, ETF was almost synonymous with 'passive investment,' which meant choosing an index and following its ups and downs. However, the emergence of active ETF has shattered this established perception," said a person from a leading fund company. This also marks the official transition of domestic ETF from 'index tracking' to a 'strategy-driven' phase.
"Flash Launch" Enters the Final Stage
Proactive ETF is one of the incremental funds that the current market is paying attention to. Unlike passive ETF which simply replicates traditional indices, it does not aim to track a specific index. Instead, fund managers actively select stocks, timing their investments, and adjust the portfolio. At the same time, it retains characteristics such as the ability to trade on-exchange and relatively transparent holdings, which are also features of ETF.
"It's about putting the active management mindset into the shell of ETF," said a person from a leading fund company. Active ETF is not just an "upgraded version" of passive ETF; rather, it retains the high transparency and flexible in-market trading features of ETF while incorporating active management capabilities, making this category an important supplement to the gap in active in-market allocation.
On November 3, Penghua Fund announced that the current valid subscription shares of Penghua Value Zhenxuan Active Management ETF have exceeded the issuance cap of 2 billion yuan. As a result, the fund will be closed ahead of schedule, and a proportional allocation process will be initiated. This is the 17th product among the first batch of 18 active ETF funds to complete its fundraising. It only took 8 trading days from the initiation of the issuance to its completion.
Since the China Securities Regulatory Commission announced the launch of active ETF in June this year, the Shanghai and Shenzhen stock exchanges have issued corresponding business guidelines to provide an institutional foundation for the launch of these products; in July, the first batch of 18 products were submitted for registration, and on October 19, they received approval. On October 23, the fundraising process began collectively.
On the first day of fundraising, products under fund companies such as Morgan, E Fund, and Fullgoal were quickly sold out. Subsequently, companies like Huaxia, Southern, Huatai-PineBridge, and Ping An also reached their fundraising targets and concluded their fundraising early, with Huabao and Penghua Funds joining in as well. Currently, there is still an active ETF under CCB Fund that is still in the fundraising phase, with the issuance coming to its final stages.
Judging from the current performance, the aforementioned products have attracted a great deal of attention from the market. The majority of subscriptions have reached their upper limits and have entered the proportional allocation phase, which requires confirmation at ratios ranging from 32.3% to 99.68%. During the issuance period, several fund companies such as E Fund and Huaxia Fund announced their own purchases, and Guotai Haitong Securities also plans to use its own funds to subscribe for multiple ETF.
As of now, fund companies and securities firms have cumulatively purchased shares for over 2.3 billion yuan. However, it is important to note that not all of this self-purchase funds are immediately credited to their accounts. Some fund companies use their own funds to complete the self-purchases during the fundraising period, while others have made clear plans to invest after the funds are listed.
Popularity doesn't come only from institutions. A total of 222,500 subscribers have subscribed to the 12 products that have been announced. Among them, the Southern Balanced Allocation Active Management ETF product alone attracted nearly 26,900 subscribers. Products under four fund companies, including Huatai-PineBridge, China Merchants, E Fund, and Dacheng, each had over 20,000 subscribers.
"For investors, this means that they no longer have to guess the style or chase hot topics on their own, and can also obtain active management capabilities in the market with a lower threshold," believes a person from a large fund company. Active ETF provides investors with an additional tool option, allowing them to retain the opportunity to achieve excess returns through active management while also enjoying the advantages of transparent holdings and convenient trading provided by ETF.
From "raising funds" to "building a good position"
The issuance has temporarily come to an end, and the test for those building positions has immediately begun, shifting the focus to the next stage of market attention. On the evening of November 2nd, a responsible official from the China Securities Regulatory Commission answered reporters' questions regarding recent efforts to stabilize the market and expectations, mentioning that in the next step, they will guide and encourage the 18 funds that have completed their fundraising to accelerate their investment and position-building activities.
Among the first batch of active ETF, products with a faster pace have already begun to build positions, and it is expected that they could be listed on the exchange as early as late November. Several representatives from fund companies also revealed that they will proceed with the construction of stock positions in batches and steadily, rather than concentrating on building positions quickly, taking into account market fluctuations and the characteristics of their product strategies.
Hu Tianfu Balanced Smart Selection Active Fund Manager Wu Zhenxiang told Yicai that it will base on a balanced industry weight strategy, and overlay a quantitative medium- to short-term industry allocation strategy and a fundamental medium- to long-term industry allocation strategy, in order to achieve a relatively balanced and moderately active investment effect.
"Based on past experience and backtesting data, especially in a structural market environment, the advantages of this strategy are even more prominent," said Wu Zhenxiang. He mentioned that a phased approach to building positions will be adopted, with positions being established relatively evenly during the closed period, in order to smoothly navigate through the position-building phase.
A person from China Merchants Fund stated that the company's active ETF is positioned as a value-oriented strategy, with an expected relatively diversified portfolio and low concentration. The fund aims to start steadily and strive to create long-term, stable returns for investors in a prudent manner. A person from the aforementioned large fund company also mentioned that the investment strategy will adopt a balanced approach, with an emphasis on the management cycle of "judgment, selection, execution, and risk control" at the asset allocation level.
It is worth noting that a major highlight of the proactive ETF requirement is that fund managers are required to disclose their daily holdings. On one hand, the frequency of adjustments to the subscription and redemption lists may increase, posing a certain challenge to the meticulous operational management of fund managers. On the other hand, the subscription and redemption lists published at the start of each trading day may also impose constraints on intraday portfolio adjustments.
A person from a large fund company mentioned that if there is a significant adjustment to the portfolio, the fund manager needs to plan at least one trading day in advance and make adjustments to the subscription and redemption list. "For fund managers, in the initial stage of actively managing ETF, it is essential to streamline the operational mechanism and control operational risks as the top priority to ensure a smooth start."
"Proactively disclose daily ETF positions. The period of building up positions is itself a public process, and the pace of this process serves as a signal," Chen Xianshun, the chief strategy analyst at Boshi Fund, told Yicai. "Accelerating" the position-building process aims to shorten the gap between the completion of fundraising and the actual establishment of positions, thereby reducing expected discounts. In terms of position-building structure, high-liquidity positions with low impact costs are established first, followed by an expansion into Alpha.
From the current perspective, Yang Jinghan, co-director of Huatai-PineBridge Fund's Active Equity Investment Department, analyzed for Yicai that recently, the pressure on the A-share market is mainly due to temporary liquidity constraints, and there has not been a substantial change in the economic fundamentals. In addition, positive factors are continuously accumulating.
"Just at this time, the proactive ETF initiative injects new vitality into the market." Yang Jinghan believes that the first batch of proactive ETF projects generally emphasize the concepts of long-term investment and value investing. This not only has the potential to help investors share in the benefits of China's high-quality economic development but also contributes to improving market pricing efficiency and guiding the cultivation of a long-term investment ecosystem.
