On December 12th, Caixin reported that the individual pension system will be expanded nationwide starting on December 15th. In terms of product expansion, the first batch of 85 equity index funds will be included in the individual pension investment product directory. In the afternoon of December 12th, multiple fund companies including E Fund, GF Fund, Boshi Fund, and Southern Fund issued announcements stating that the funds selected for inclusion in the individual pension product directory will increase the number of Y-class shares and amend certain clauses in the fund contracts and custody agreements. According to the regulatory disclosure of the product directory, the first batch of 85 equity index funds come from 30 public fund companies tracking various broad market indexes, including products tracking dividend indexes such as the CSI 300 Index, CSI 500 Index, ChiNext Index, among others. Which products can be included? Prior reports indicated that continuous quarterly scale higher than 1 billion or at the end of November scale higher than 2 billion. In addition, the performance requirement must outperform the benchmark. According to official data, as of December 12th, with the inclusion of the 85 index funds, individual pension investments can now include a total of 284 fund products, all of which have established Y-class shares. Index funds have a clear investment style and relatively low fee levels, and their inclusion will provide investors with more choices. The fees are also relatively favorable, actively benefiting investors. As the individual pension system is expanded nationwide, the second batch of products will primarily expand with index products. Why is this the case? How should individuals choose? What impact will this have on the development of index funds? How will the inclusion of index products affect the individual pension system? Fund companies have quickly provided interpretations around these four core questions. Question One: Why are index funds being included first? Index funds, with their low fees, transparency, and risk diversification, have become important tools for global pension investments. The inclusion of index type funds in the second batch was expected. GF Fund stated that from the perspective of product expansion, including index funds in the range of individual pensions can provide individuals with more diverse choices, facilitating the rational arrangement of pension assets from the perspective of pension asset allocation to ultimately increase the pension replacement rate. Furthermore, from the perspective of cultivating and guiding more medium and long-term funds into the market, pension funds are truly long-term funds that, by clearing the way for individual pension investments in index funds, can bring additional funds to the market, thus enhancing market stability. The integration of individual pensions and index investments is expected to achieve a synergistic effect in enhancing investors' retirement planning awareness, optimizing the retirement investment experience, and achieving more than the sum of its parts. Jia Shi Fund believes that the broad reach of index fund products complements the inclusive nature and long-term investment characteristics of individual pension products. On one hand, individual pension demands provide the driving force for individual pension investment and, on the other hand, index funds, relying on risk diversification, low costs, transparency, and stable style, provide individual pension investments with more diverse choices. Hua Xia Fund pointed out that from a social perspective, through investing in index funds, personal pension accounts can share the benefits of the national economy's positive development, thereby achieving value preservation and appreciation of personal pension reserves, reducing the burden of social pensions, effectively coping with the challenges of an aging population. Furthermore, the appreciation of pension assets is expected to enhance residents' wealth effects, further promote steady improvement and long-term positive trends in the economy. At the same time, the inclusion of index funds in individual pension accounts is expected to strengthen financial literacy and risk awareness throughout society, promoting healthy development of financial markets. Zhao Shang Fund believes that with the national implementation of individual pensions, it is imperative to expand and upgrade the investment products available for individual pensions. Building upon the foundation of pension FOFs, the inclusion of index funds in the list of investment products for individual pensions is due to the clear advantages of these products: 1. Low barriers to entry (starting as low as 1 yuan), simple operations, can be purchased directly without the need to open a securities account; 2. High transparency, strictly tracking the performance of ETF target index funds, facilitating off-market investors in asset allocation; 3. No need to constantly monitor the market, low requirements for timeliness of investor operations, suitable for phased investment or long-term periodic investment plans. From a product perspective, the newly included broad-based and dividend-based products align with the long-term stable growth investment objectives of pension funds. Broad-based index funds reflect the overall performance of a certain type of market, covering a wide range of industries, a large number of constituent stocks, and diversified risks. Pension investments often span a period of ten years or even decades. In a market with a healthy and sustainable economic outlook and a long-term upward trend, investments in broad-based index funds can help pension investors share the fruits of economic growth and achieve long-term stable returns. Dividend strategy indexes focus on long-term continuous dividends and high dividend ratios of listed companies, most of which have stable operations, strong profitability, and ample cash flow, providing relatively high safety margins in a volatile market environment. Investing in dividend indexes can help pension investors receive stable dividends and share the long-term performance growth benefits of listed companies. For example, Huatai Bairui's low volatility ETF, which is the largest scale dividend-themed product included in individual pensions this time, is also the largest dividend low volatility ETF in the market, with the latest scale exceeding 10.8 billion yuan. With a large number of investors, according to the latest quarterly report, the number of holders of its feeder funds exceeds 610,000, and it has achieved continuous monthly dividends for 15 consecutive months. Regarding fund distribution platform, Xueqiu Bunny statedIt is stated that the personal pension fund pool can be expanded. On one hand, this can provide investors with more low-fee passive asset choices, diversify investment risks, and potentially increase the returns of the three-pillar pension system. On the other hand, with investors facing widespread losses in the pension FOF sector, expanding the fund pool may reignite investor enthusiasm and promote the comprehensive implementation of the personal pension system. Lastly, as a source of medium to long-term funds, the entry of personal pension funds into the market through passive index funds also helps to improve market stability and reduce short-term market fluctuations.Question 2: How can individuals choose the right products? The expansion of products provides investors with more choices, but how to choose from a wide range of products is the topic of greatest concern for investors. According to China Europe Fund, considering that Chinese residents have a lower risk appetite for financial asset allocation and have more trust in bank deposits and wealth management products, the dominance of deposits compared to overseas situations is likely to be maintained for a long time. However, with interest rates trending downwards and the cost-effectiveness of equity asset allocation becoming more apparent, the proportion of funds and direct investments is expected to increase. The addition of index funds and other products enriches the range of investment products, which is more favorable for the long-term development of personal pensions. Several fund companies, such as E Fund and GF Fund, have provided different perspectives on how to allocate investments based on goals. They suggest: - For investors seeking long-term, stable returns, they can consider broad-based index products such as the CSI 300 and CSI A500, as well as dividend strategy index products focusing on companies with long-term dividend growth potential. - For investors with higher risk appetite and seeking growth potential, they can consider allocating to index funds with strong growth potential such as the ChiNext 50 and Growth Enterprise Market indices products. - Additionally, for investors seeking higher returns and capable of taking on greater risk, they can consider index-enhanced funds, which actively seek excess returns on top of tracking their designated index. From the perspective of an investor's risk tolerance, Yinhao, a fund manager at Bosera Fund's Index and Quantitative Investment Department, suggests investors allocate their investments as follows: - First, assess your risk preference and tolerance; - Next, based on your risk preference and tolerance, select asset classes and determine the allocation of each asset class; - Finally, based on factors such as fees, expected returns, volatility, etc., determine specific investment targets. Wanglele, the fund manager of Fuguo CSI A500 ETF, points out that the diversity in personal clients' preferences arises from their age differences, risk preferences, and occupational variations. "For example, younger individuals may choose products with a higher proportion of equity assets; risk-tolerant investors may select index products with greater flexibility; employees in single industries may consider diversifying their pension funds into index funds of other industries to reduce risk exposure in a single area," Wanglele stated. Question 3: How does the inclusion of index products in pension products affect the development of indices? This year has been a significant year for passive index funds such as ETFs. As of the end of the third quarter, the scale of domestic passive funds (3.34 trillion yuan) surpassed that of active funds (3.15 trillion yuan) for the first time, with the inclusion of index funds in the personal pension fund directory holding important positive implications for the development of index funds. E Fund believes that, on one hand, this move helps attract more long-term incremental funds into the capital market through index funds, creating a "long-term investment" ecosystem; on the other hand, it drives continuous innovation and exploration of index funds. Taking mature overseas markets as an example, by the end of 2023, the scale of passive index funds in the United States was approximately 5.9 trillion US dollars, with 2.6 trillion US dollars coming from pension funds, accounting for about 45%. The inclusion of index funds in personal pension investm... (More)Maintain efficient communication. In the execution process, a development path that integrates local wisdom and global perspectives has been explored, combined with the pain points, needs, and scenarios of Chinese residents, to provide tailor-made elderly care solutions.Enxuehai further stated that the management of pension funds needs to focus on asset allocation, anchoring the allocation range and proportion of major asset classes, emphasizing long-term investment, long-term holding, and long-term evaluation. Putting the interests of investors first is the important foundation of pension target funds. This article is from "Cailianshe", GMTEight editor: Liu Xuan.