Our Money OK!

I always think that mutual fund is a good business, not necessarily for investors, but surely for asset managers. Imagine you manage a fund of RMB 100 million for 1% fee, you make a million for sure, no matter how the fund does (though it matters a lot). In a sense, hedge fund is part of the asset management business, except it serves a special group of people on a different incentive plan and under different regulatory requirement.

The money pools can sometimes grow really big – here’s a list [PDF]. I learned that when a fund reaches the billion range, higher-than-normal returns become increasingly challenging, that’s why I found the ‘07 result of the Social Security Fund (SSF) jaw-dropping.

“本报告期末，按成本计算，基金资产总额4396.94亿元，其中：社保基金会直接投资资产2327.54亿元，占比52.94％；委托投资资产2069.40亿元，占比47.06％。按市值计算，基金资产总额5161.52亿元。

[..]本报告期基金已实现收益1129.20亿元，已实现收益率38.93%；本报告期浮动盈利增加额324.30亿元，经营业绩1453.50亿元，以此计算的经营收益率为43.19%。”

What? 43.19% on a multi-billion fund, and 38.93% realized? Given that the stock market shot the light off last year, it’s still a surprise.

Digging further, I found this in the Investment Guidelines.

“第二十八条 划入社保基金的货币资产的投资，按成本计算，应符合下列规定：(一) 银行存款和国债投资的比例不得低于50％。其中，银行存款的比例不得低于10％。在一家银行的存款不得高于社保基金银行存款总额的50％。(二) 企业债、金融债投资的比例不得高于10％。(三) 证券投资基金、股票投资的比例不得高于40％。”

And this is what the fund manager did when the stock market skyrocketed:

“近几年来，社保基金理事会按照社保基金资产配置计划的要求，对股票投资进行了双向的纪律性再平衡操作。从2003年至2005年，社保基金股票占总资产的比例，低于资产配置计划的目标比例，社保基金面临股票投资不足的风险，不利于社保基金长期保值增值。因此，社保基金逐渐增加了股票投资比例。2007年，由于股票市场大幅上涨，社保基金股票投资比例，在进入目标比例区间后一度超过目标比例，较大偏离了资产配置的比例区间，使社保基金整体风险超出资产配置计划要求的风险承受水平，需要通过再平衡操作来降低股票投资比例。因此社保基金进行了纪律性再平衡操作，使股票投资比例回到了资产配置目标区间。”

Thanks to the discipline, my pension safe! Yeah!

Can’t wait to see this year’s balance.