Tianhong Fund's fixed income scale doubled, and its top income position changed to the bottom.

The fund's yield slipped from first place to last place, how long did it take? Not too long, not too short, it took the Tianhong Fund Fixed Income Team 2 years.

In the latest yield ranking released by Haitong Securities, as of the first quarter of 2024, Tianhong Fund's average yield for nearly 1 year is 1.8%, and the average yield for nearly 2 years is 4.12%, ranking last among the top 30 large and medium-sized fixed-income companies.

Two years ago, from the end of the first quarter of 2021 to the end of the first quarter of 2022, Tianhong Fund's fixed income average yield for nearly 1 year was 6.18%, ranking first among the top fund companies.

The "scale curse" has caused the returns to become the worst after doubling in scale.

Such a huge gap has laid hidden dangers as early as 2021.

In 2021, Tianhong Fund's bond fund scale surged from 76.2 billion yuan to 171.5 billion yuan, an increase of nearly 100 billion yuan, with a growth rate of nearly 125%. By the first quarter of 2022, Tianhong Fund has for the first time entered the ranks of large fixed-income companies rated by Haitong Securities.

Since then, Tianhong Fund has claimed to be a "first-line fixed-income giant" in its publicity. However, as the scale rose to the first line, the performance dropped to the fifth line.

There is a saying in the industry that the "curse of scale" effect exists. When the scale of fund management increases, the difficulty of management rises, and the performance returns are likely to deteriorate.

The "curse of scale" was originally popular in some stock funds, but it has worked for Tianhong Fund's fixed income team.

At the end of 2021, Tianhong Fund's annual average return for fixed income products was 0.56%, ranking first among the top 30 large and medium-sized fixed income companies. In the first quarter of 2022, the average return for one year was 6.18%, also ranking first.

Just two years later, by the end of the first quarter of 2024, the average return of Tianhong Fund's fixed income products for nearly one year was 1.8%, and the average return for nearly two years was 4.12%, dropping from first place to last place among the top fixed income companies.

With a return rate of 1.8%, it ranks in the bottom 85% of the entire market, underperforming the market average (3%) by 1.2% and underperforming the Shanghai government bond (5%) by over 3 points. (Note: pure mathematical average)

In the past two years, several medium-sized fixed income fund companies have shown outstanding performance, with the average returns of ChinaAMC, CICC, and Xinyuan Fund reaching 7.47%, 7.42%, and 7.13% respectively, outperforming Tianhong Fund by over 3 points in two years.

Performance has driven an increase in scale, with ChinaAMC and Xinyuan Fund both doubling in size in the past two years, and CICC Fund's scale also increasing by 50%.

In comparison, after the decline in performance in the past two years, Tianhong Fund's scale growth in 2022 and 2023 was only 0.7% and 6.2%, far below the market average growth rate. 2023 was a big year for bond funds, with the total market size of bond funds increasing by 1.042 trillion, a 23% increase.

Tianhong Fund also underperformed in the index bond fund market. In 2023, index products experienced a major outbreak, and the scale of bond index funds also increased significantly. According to statistics, by the end of 2023, there were 252 bond index funds in the entire market, with a total scale of 773.8 billion, accounting for 14.8% of all bond products.

During the same period, Tianhong Fund had only 4 bond index funds, with a total scale of about 7 billion, accounting for less than 4% of its bond products.

Jiang Xiaoli's scale surged and continuously underperformed government bonds

As the general manager of the fixed income department, Jiang Xiaoli is the leading figure and soul of Tianhong Fund's fixed income department. Her representative work, Tianhong Yongli Bond, has won the Golden Bull Award four times, with a ten-year return doubling from 2012 to 2021, and a continuous positive return for ten years.

In 2021, Tianhong Yongli Bond gained a lot of attention and attracted numerous investors. The number of holders increased from 178,269 to 2,262,055 within the year, nearly 10 times. By the end of 2022, among all fixed income funds in the market, Tianhong Yongli had the highest number of holders and was called the "national fund" by the media.

By mid-2022, the number of holders reached a peak of 2,864,320. At the same time, the performance began to decline, with a loss of -1.51% in 2022, the first negative return in nearly ten years.

In the following years of 2022, 2023, and up to April 19, 2024, the performance continued to underperform the returns of Shanghai government bonds.

In the past year, the returns of Tianhong Yongli Bond B were 1.12% and 5.48% respectively, both underperforming the benchmark for two consecutive years.

The number of holders has decreased, with the latest data showing that by the end of 2023, the number of holders of Tianhong Yongli Bond was 2,117,988, a decrease of 746,332 from mid-2022, a 26% decrease.

Balancing scale and performance has become a difficult problem for Jiang Xiaoli and the entire Tianhong fixed income team.

Ranked at the bottom of the "one drag nine" and cleared out by pension funds

In addition to Jiang Xiaoli, there are three other fund managers, Zhang Yu, Du Guang, and Zhao Dinglong, who jointly manage Tianhong Yongli Bond.

Du Guang is another main fund manager of the Tianhong fixed income team, with a total fund size of 31.9 billion yuan, managing nine funds including Tianhong Tianli Bond, Tianhong Hongfeng Enhanced Return Bond, Tianhong Diversified Income Bond, Tianhong Fengli Bond, Tianhong Yongli Bond, Tianhong New Value Hybrid A, Tianhong Diversified Profit Bond, and Tianhong Guangying Six-Month Holding Hybrid, and Tianhong Diversified Sharp Selection One-Year Holding Hybrid.

The fund types also cover four types: partial debt hybrid funds, flexible hybrid funds, hybrid secondary bond funds, and hybrid primary bond funds, involving both bond funds and stock funds.

Managing "one drag nine" and multiple types of funds poses a challenge for fund managers. What performance has Du Guang brought?

Data shows that in the past year, the returns of the three bond funds managed by Du Guang were -11.01% for Tianhong Tianli Bond, -10.79% for Tianhong Hongfeng Enhanced Return Bond, and a loss of -9.7% for Tianhong Diversified Income Bond. (Using C shares as an example, the same below)

In the past year, all three bond funds significantly underperformed the benchmark for the same period, with Tianhong Tianli Bond lagging by 14 percentage points, Tianhong Hongfeng Enhanced Return lagging by 10.7 percentage points, and Tianhong Diversified Income lagging by 9.9 percentage points, with rankings all in the bottom 5% of the industry.

The losses and drawdowns of the three bond funds are comparable to equity funds. In the past year, the maximum drawdown for Tianhong Tianli Bond was 17 percentage points, Tianhong Hongfeng Enhanced Return was 19 percentage points, and Tianhong Diversified Income was 18 percentage points.

Tianhong Tianli Bond is a hybrid primary bond fund, and Tianhong Hongfeng Enhanced Return and Tianhong Diversified Income are hybrid secondary bond funds. Through the holding situation, it can be seen that all three funds are essentially convertible bond funds, with convertible bonds accounting for over 80% of the assets in 2023.

By the end of 2023, 110% of the bonds purchased by Tianhong Tianli Bond were convertible bonds (exceeding 100% due to the inclusion of exchangeable bonds), and the proportions for Tianhong Hongfeng Enhanced Return and Tianhong Diversified Income were also as high as 98% and 80%, respectively.

The high proportion of trading convertible bonds is one of the main reasons for the high drawdown. When the market is good, convertible bonds can share a high proportion of the stock market's excess returns, but when the market falls, they also suffer greater drawdowns.

Data shows that by the end of 2022, the scale of Tianhong Tianli Bond was 2.555 billion yuan, which was reduced to 1.367 billion yuan by the end of 2023, nearly halved.

The largest redeemers of C shares were the basic endowment insurance funds, which held 45,016,237 by the end of 2022, accounting for 37.39%. By the time of the 2023 annual report, they had almost disappeared, almost completely cleared out.

In addition, in 2022, Taikang Asset Credit Incremental Fixed Income Pension, the second largest holder, is also not on the list of holders for 2023.

In 2021, Tianhong Fund's scale surged to become a leading fixed income powerhouse, but its performance declined, causing its scale to stagnate.

Scale determines the strength of a fund company. Only by pursuing scale growth while delivering good performance returns and protecting investor rights can a fund company truly grow and strengthen in the long run.

Source: Choice, data as of March 31, 2024.