With the Central Politburo meeting shifting the tone of monetary policy from "prudent" to "moderately loose", the enthusiasm for long positions in the bond market is high.
Entering December, expectations of monetary easing are high, and the yields of various maturities and varieties in the bond market are rapidly declining. The 10-year treasury bond bond yield continued to break through the low point in the year, currently located near 1.75%, and has declined by about 90 bp since the beginning of the year. The bond industry exclaimed that "there are still a few BP left in my career", while the fixed income industry lamented that "medium and high interest assets are difficult to find". The entire asset industry has almost no objection to the term "asset shortage".
In an interview with a Chinese journalist from a securities firm, Zhang Pengjun, General Manager of BlackRock and CCB Wealth Management, stated that how to operate in a low interest rate environment has been a topic he has been contemplating for the first year of his tenure.
Zhang Pengjun, General Manager of BlackRock CCB Wealth Management
Product performance is the most important indicator that can bear and test the resilience of a wealth management company's investment research. And Zhang Pengjun's thinking results are to some extent highlighted in the performance of BlackRock Jianxin Wealth Management related products.
The Beiyu Credit Selection series, which is based on credit bonds, has achieved a performance target rate of 98% as of the end of the third quarter this year, with an average annualized yield to maturity of 3.67%; The performance compliance rate of Beiyuan USD (including QDII) closed products as of the end of November was as high as 100%; The only 10-year pension financial management pilot product currently issued in China has an annualized return rate of 5.9% since its establishment on December 12 this year, ranking first among 51 pension financial management pilot products in terms of performance. The significant feature of this product is that it contains 30% equity assets.
What does the "moderately loose" monetary policy of the Central Politburo meeting mean for investment and institutional allocation behavior? How to enhance equity investment capabilities and use more effective assessment indicators to constrain and incentivize investment managers' investment behavior under the new normal of low interest rates? How is BlackRock CCB Wealth Management preparing for personal pension management and can it continue the strong performance of its previous pilot products in pension management? Securities China reporter now presents Zhang Pengjun's latest core thinking as follows.
Low interest rates have become the 'new normal' for wealth management development, and wealth management companies need to improve in three aspects
Chinese reporter from the securities firm: As a landmark pricing anchor for risk-free assets, the yield of 10-year treasury bond has broken down from below 2.6% at the beginning of January this year to below 1.8%. With the proposal of a moderately loose monetary policy at the Central Politburo meeting, what investment opportunities will there be in the wealth management market? What changes will occur in the allocation behavior of wealth management companies?
Zhang Pengjun: In the short term, with the gradual implementation of a moderately loose monetary policy, the interest rate trend in the bond market may show a further downward trend. In this trend, fixed income products, with their relatively stable returns and controllable risks, will still be ideal tools for customers to manage their finances.
In the long run, as the risk-free interest rate in the domestic market continues to decrease, investors may face three choices: first, adhere to the bottom line of low risk, slowly accept and adapt to the arrival of the low interest rate era, and accept the new normal of low returns for low-risk wealth management products; Secondly, based on one's own situation, allocate a certain proportion of long-term risk budget in financial planning, allocate a certain proportion of medium and high-risk products according to one's own risk tolerance, participate in the equity market, and strive to obtain corresponding risk returns; The third is to focus on overseas markets, which can include domestic foreign currency products, QDII and QDLP products, multi asset products configured with overseas products, as well as various cross-border funds or wealth management products, and so on.
Regardless of which choice investors make, wealth management institutions have the opportunity to provide customers with more and better wealth management products.
Firstly, wealth management institutions need to continuously improve their investment capabilities, utilize the breadth of their wealth management licenses to explore various high-quality assets, provide more asset allocation solutions, and meet the wealth management needs of customers with different risk tolerances. This includes both "fixed income+" products that use fixed income assets as a foundation and add equity elasticity, as well as multi asset and multi strategy allocation products, such as hybrid pension financial products designed for retirement needs.
Secondly, wealth management companies should also enhance their investment capabilities in equity products, improve the level of management refinement and trading efficiency, and strive to create more returns for customers.
Finally, wealth management companies need to make good use of investment opportunities in overseas markets, flexibly use and allocate various cross-border investment portfolio tools, strive to find returns from deeper global markets, supplement and improve the comprehensive income level and risk resistance ability of investment portfolios, and serve customers' wealth management needs.
No matter which choice customers make, wealth management institutions have the opportunity to provide more and better products, because compared to other asset management institutions, the licenses of wealth management companies have the widest range of configurable assets, which gives them the chance to explore more high-quality assets in the market. In terms of improving management efficiency and trading efficiency, such as the trading capacity of the bond market and the level of refined product management, there are still many directions that wealth management companies need to improve and enhance.
Securities China reporter: You just mentioned that under the new normal of low interest rates, wealth management companies need to improve their investment capabilities in equity products. But many industry insiders believe that the "bottleneck" of integrating wealth management into equity has not been truly overcome. Including that the first purchase of equity R4 and R5 products still needs to be signed at the counter, and that bank financing has not yet been approved to sell on the Internet third-party platform and brokerage platform, bank financing will be limited to the bank itself. How do you view this?
Zhang Pengjun: You mentioned two very good questions here. One is about the sales methods of high-risk wealth management products; One is about the sales methods of ordinary wealth management products. Behind these two issues lies the same principle: the appropriate sale of financial products, and how to sell wealth management products with different risk levels to wealth management customers with appropriate risk tolerance.
The requirement for face-to-face interviews for the first sale of high-risk products is to standardize sales behavior, ensure that sales personnel provide complete and accurate risk disclosure to customers, and ensure that investors fully and accurately understand product features and risks, thereby determining products that are suitable for investment risks. With the development of the Internet, the progress of financial technology and the gradual maturity of investors, we believe that there should be a more convenient way to achieve the same goal.
Following the same logic, wealth management products have unique advantages compared to similar fund products, but currently can only be sold through banking channels. Under the condition of convergence of preconditions such as product rules, credit management requirements and sales supervision, it is a useful attempt to open the mature third-party platforms such as the Internet and securities companies to the products of financial management companies, which can help financial management companies to transform into net worth and promote the comprehensive implementation of new regulations on large asset management; For customers, in addition to traditional fund companies' money and bond funds, there are also many options for wealth management products, which can be considered a win-win situation.
Securities China reporter: The "performance comparison benchmark" and its derived assessment of the compliance rate of wealth management products have sparked more and more discussions in the industry in recent years. How do you view the phenomenon of multiple banks lowering their performance benchmarks for wealth management? Is the necessity of "product compliance rate" sufficient? What assessment indicators will BlackRock CCB Wealth Management use to constrain and incentivize investment managers' investment behavior?
Zhang Pengjun: "Performance comparison benchmark" is usually based on fixed values or fixed value ranges as the performance comparison benchmark for wealth management products. It relies on the current environment where 99% of wealth management products are fixed income and mixed products, and 99% are R1-R3 low-risk products. The pricing method understood and accepted by wealth management institutions and clients is reasonable.
The current market's questioning of some phenomena related to performance benchmarks is partly due to the fact that wealth management customers' expectations of expected returns on wealth management products lag behind changes in the interest rate market, resulting in negative interest margin gaps between debt and asset sides for wealth management companies during periods of interest rate decline. The pressure of debt cost and the pressure of compliance rate are combined, which makes it easy for wealth management companies to deform their actions, thereby increasing the investment risk of their products, or making various "innovations" in the form of performance benchmarks, which we do not advocate.
We believe that in the long run, wealth management products should return to their roots, reduce investors' expectations of returns through investor education and daily promotion guidance, and strictly constrain various risks such as duration, leverage, and credit. Efforts should be made to improve the compliance rate of wealth management products with absolute returns as the goal, and establish a good reputation for wealth management products after net asset transformation.
From the customer's perspective, we suggest combining the "performance benchmark" and "product compliance rate" for evaluation, which can reveal the product design ability, investment management ability, and risk control ability of the wealth management company. A wealth management company that can scientifically allocate assets, design and optimize products, propose performance comparison benchmarks, and achieve satisfactory standards based on market environmental conditions will undoubtedly win the trust of customers. And based on trust experience, customers will also entrust more assets to wealth management companies. At the same time, the "performance benchmark" is not necessarily the higher the better, but should be judged from the perspective of risk adjusted returns to determine whether the wealth management company has truly demonstrated its professional capabilities and created the best returns for wealth management clients at an acceptable risk level.
As for the phenomenon of wealth management companies lowering their benchmarks, we believe that it is mostly a commercial behavior determined by the market environment. If the lowered benchmark reflects the real market returns and provides customers with returns that comply with market rules and achieve expected goals in the long run, then such a result is actually completely reasonable. But for the current market attention on the compliance rate data, we believe that it needs to be examined more finely, and different risk levels and product sizes need to be analyzed and demonstrated separately in order to truly reflect the performance compliance of wealth management companies.
In our company culture, loyalty to customers' interests always comes first. Every penny that customers invest in our wealth management products represents their trust in our company. We need to provide our clients with trustworthy financial products and services with professional investment management and risk control capabilities.
Shareholders are like a big gold mine, and a new personal pension wealth management product is already being prepared
Securities China reporter: From the perspective of product shelves, how will BlackRock CCB Wealth Management's products and assets be roughly manipulated in 2025? For example, what types of products to increase issuance and what types of assets to allocate?
Zhang Pengjun: In 2025, our work goal remains to better meet the financial needs of our clients and help them achieve wealth and happiness. The scale of the wealth management market has exceeded 30 trillion yuan, and the latest market characteristics can be summarized into three 99%: 99% of customers are individuals, 99% of product risk levels are R1-R3 medium low risk, and 99% of wealth management products are fixed income and mixed income. These three "99%" also indicate the mainstream nature of the wealth management industry.
Based on this premise and understanding, the company will adhere to its established development strategy in 2025, strengthen and expand its basic business, and create new and excellent color products. On the one hand, the company will continue to focus on mainstream (low-risk R1-R2) product areas next year, strengthen fixed income investment capabilities, and increase product investment in cash enhancement strategies, fixed term fixed income and other essential product areas to meet the daily financial needs of channel customers.
At the same time, the company will continue to practice product innovation concepts, create investment characteristics, continuously introduce BlackRock's globally leading investment strategies to the Chinese market, and launch new products that meet the diverse financial needs of the Chinese market and customers in areas such as personal pension investment, fixed income enhancement, and multi asset allocation, creating new ideas and advantages.
Securities China reporter: What do you think are the latest experiences of the overseas wealth management market, especially the shareholder BlackRock Group, that can be introduced into the Chinese market?
Zhang Pengjun: Currently, based on the customer demand in the domestic market, we have noticed that there are three main aspects of experience that we can learn from. One is a very mature investment strategy overseas, especially in the same market and subject matter, and an excellent strategy that has been fully validated by overseas teams. We can adopt a 'take it for it' approach and create a multi asset portfolio tool, either to increase returns or reduce risks, to provide support for the stable and low wave demand of wealth management products;
The second is the experience of overseas product innovation and design. Taking elderly care products as an example, BlackRock Group has over 30 years of experience in managing pensions and serving elderly care customers. Its innovative "iRetire" and "Life Path Paycheck" in the field of elderly care are leading the elderly care investment market, and many concepts and methods are worth learning from;
Finally, there is the application of financial technology overseas. On the one hand, financial technology can make the education of investment products easier to understand, make the investment process more convenient, and make various investment products more accessible; At the same time, financial technology can empower investment research, signal verification, portfolio construction, and risk management, making investment management smarter and more scientific. Ultimately reflected in products and services, it can provide investors with a better investment experience and return.
There are definitely more aspects that need to be learned and referenced than these three. I feel that our shareholders are like a big gold mine, with abundant resources to discover and introduce, and then combine with the domestic market and customer needs to implement, ultimately serving our wealth management clients. This is also one of our main work plans for next year.
Securities China reporter: BlackRock CCB Wealth Management is currently the only joint venture wealth management institution in the market that participates in and issues personal pension wealth management products. How do elderly care related products perform? What are the further plans for elderly care products in 2025?
Zhang Pengjun: BlackRock Group is a pioneer and leader in global pension investment. In 1993, BGI launched its first target date fund (BGI 2000 Fund) in the US market, ushering in an era of target date funds (TDFs) serving the US pension market represented by 401 (k) plan participants.
In 2009, BlackRock acquired BGI and consolidated its target date funds into the Life Path series. In the first half of 2024, BlackRock launched the Life Path Paycheck series of elderly care products, once again leading innovation in elderly care products. As of the end of last quarter, over half of the $11.5 trillion in client assets managed by BlackRock Group were pension investments, directly covering nearly 40 million US workers, accounting for a quarter of the US workforce.
Our successful exploration in the field of pension financial products is first and foremost thanks to the strategic vision and professional trust of regulatory authorities and China Construction Bank. Based on a comprehensive and in-depth understanding of the regulatory orientation and market demand for elderly care finance, we fully drew on BlackRock Group's experience in elderly care product design and risk management, and worked closely with our partners in China Construction Bank to launch two pioneering products domestically.
Firstly, in May 2022, the first ten-year pension financial management pilot product was launched, which is currently the only one in China. As of December 12, 2024, the annualized return rate since its establishment is 5.9%, ranking first among 51 pension financial management pilot products in terms of performance. The significant feature of this product is its long closed term, which allows investors to accumulate more equity assets through long-term allocation while accumulating a "safety cushion" of increased coupon rates, in order to increase returns for investors.
Secondly, the first personal pension target risk management product was issued in July 2023. As of December 12, 2024, the annualized return rate of the pension share has been 4.75% since its establishment, with net asset volatility and maximum drawdown controlled within 2%. Its performance has remained stable in the top 10% of similar products. These features provide customers with a good holding experience, enhance their confidence in continuous investment and long-term holding, and have been recognized by customers: the product scale has grown nearly 50 times since its establishment.
In 2025, based on a careful summary of the experience of the first two pension wealth management products, we are actively promoting the launch of the next personal pension product by combining BlackRock's international advanced investment concepts and the risk preferences of pension product customers. This product is tailor-made for the comprehensive implementation of the personal pension system, and is very suitable for pension wealth management customers who have low risk tolerance but want to obtain long-term equity returns.
The company has utilized BlackRock's globally most advantageous systematic active equity investment (SAE) strategy in its pension wealth management products. As far as we know, of the $211 billion management scale under this strategy, 91% have outperformed the performance benchmark in the past three years, and 99% have outperformed the performance benchmark in the past ten years.
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