Asset Management in a Low-Yield World
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In recent years, the asset management industry has undergone a significant transformation, driven by the downward trend of interest rates and the high performance of the bond marketSpecifically, there are two key developments worth notingFirstly, the landscape of bank wealth management has changed, leading to a resurgence in its size after a period of declineSecondly, public funds, contrary to prevailing market trends, have shown robust growth, surpassing the scope of bank wealth management and solidifying their position as leaders in the sector.
As of mid-2024, bank wealth management products have seen a substantial increase, reaching 28.53 trillion yuan, representing a 6.4% growth from the end of the previous yearThis turnaround is largely attributed to the careful and cautious approach adopted by wealth management subsidiaries within banks following the market fluctuations of 2022. Whereas earlier periods may have encouraged riskier investments, the focus has shifted toward low-risk assets
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This shift is particularly notable for average investors; despite a decrease in deposit interest rates, the safety and reliability of bank wealth management products make them an attractive option compared to higher-risk alternatives available in the market.
In tandem with bank products recovering, public funds have remarkably exceeded bank wealth management assets for the first time in 2023 and have continued to expand their lead into 2024. By mid-2024, public fund assets had surged to 31 trillion yuan, continuing to outpace traditional banking products in both growth rates and absolute sizeThe current bull market in bonds facilitates this upward trajectory, with money market funds and medium-to-long-term pure bond funds leading the growthAs the contribution limits for personal pensions increase, there is still significant room for expansion within public funds.
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The past few years have exposed the complexities and volatility of the global economic landscape, which has profoundly affected the operational dynamics of asset management firmsTraditional investment strategies have struggled to maintain previous yield levels, compelling firms to explore innovative avenues and adapt their business models
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Bonds and similar fixed-income assets offer a steady cash flow, fulfilling investors’ primary needs for security and income stability
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This dual approach aims to ensure that firms can meet investor expectations for stable and sustainable profits while fostering a more mature and resilient asset management market.
Looking forward, the asset management market now faces a new array of opportunities and challengesFirstly, it is essential to closely monitor various growth opportunitiesAs the Chinese economy continues to stabilize and recover, there are increasing structural investment prospects in sectors like technology innovation and green industries, providing fresh opportunities for asset management firmsSecondly, continued innovation of financial products is criticalWith falling interest rates, banks are finding it increasingly challenging to identify safe and stable yielding assetsGiven the prohibitions surrounding manual interest supplements, the availability of cash and deposit products as viable asset allocations has diminished
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