BlackRock's "brother" in the same industry, funds are once again "losing" in wealth management!

International giant BlackRock has two well-known subsidiaries in mainland China.

They are BlackRock Fund Management, a wholly-owned fund company, and BlackRock CCB Wealth Management, a joint venture wealth management company.

One is fully owned, the other is a joint venture. One is a major public fund company, the other is a wealth management company.

If we talk about their ability to invest in stocks, it seems that the difference is clear.

But in reality, the results are unexpected!

Net Asset Value Growth in the First Half of the Year

According to the latest quarterly report of the Beiying A-share New Opportunity Private Banking Exclusive Wealth Management Product (minimum holding period of 360 days) released by BlackRock CCB Wealth Management.

As of the end of the first half of the year, the unit net asset value (cumulative net asset value) of this product is 0.8603. In the first half of the year, the net asset value growth rate of this product was 2.74%.

Is this performance good?

It depends on who you compare it with.

BlackRock's other institution in China, the first product managed by BlackRock Fund Management, is the BlackRock China New Vision Fund A (hereinafter referred to as BlackRock Fund). As of the end of the first half of the year, the cumulative unit net asset value of the fund was 0.7008.

And the return in the first half of the year was over -12%.

In comparison, BlackRock CCB Wealth Management seems to have the upper hand.

Equity Wealth Management Shows Growth in the First Half of the Year

BlackRock CCB Wealth Management's Beiying A-share New Opportunity Private Banking Exclusive Wealth Management Product (minimum holding period of 360 days), hereinafter referred to as "Beiying A-share New Opportunity".

The product was issued by the first joint venture wealth management subsidiary in China, BlackRock CCB Wealth Management, in September 2021.

The product is a rare equity product among wealth management subsidiaries at that time, and it has a strong "quantitative" flavor. The product strategy can be roughly summarized as "systematic active stock investment strategy based on cutting-edge technologies such as alternative data analysis and natural language processing".

The quarterly report shows that as of the end of the first half of the year, the unit net asset value (cumulative net asset value) of Beiying A-share New Opportunity is 0.8603. In the first half of the year, the net asset value growth rate of this product was 2.74%.

However, although the net asset value has increased, the scale has shrunk. As of the end of the first half of the year, the asset net value of this product was 1.89 billion yuan, a decrease of 123 million yuan from the end of the previous year.

Outperforming "Fellow" Fund Products

In comparison, another asset management institution in China that BlackRock participates in, the first product managed by BlackRock Fund Management, the BlackRock China New Vision Fund A (hereinafter referred to as BlackRock Fund), had a much larger decline in the first half of the year.

The unit net asset value dropped from 0.8003 at the end of the previous year to 0.7008 at the end of June this year, estimated to be over 12%.

The fund was established on September 7, nine days earlier than BlackRock CCB Wealth Management's wealth management product, but its performance is a bit "disappointing".

BlackRock CCB Wealth Management's Beiying A-share product made money in the first half of the year, while BlackRock Fund suffered significant losses. According to China Wealth Management Network, as of August 9th, the net asset value per unit of Beiying A-share New Opportunities is 0.8875, while the net asset value per unit of BlackRock Fund has fallen below 0.7.

Different Concentration of Holdings

Overall, there may be several factors contributing to the difference in returns between the two.

Firstly, there is a significant difference in the concentration of individual stocks between the two.

According to the semi-annual reports released by the two institutions, as of the end of the second quarter, the top ten holdings of BlackRock Fund accounted for 36.7% of the net asset value, which is more concentrated than the holdings of Beiying A-share New Opportunities (34.36%).

Furthermore, in terms of total holdings, as of the end of last year, BlackRock Fund held only 35 stocks, while Beiying A-share New Opportunities has consistently held 100-200 stocks since its establishment, resulting in a more diversified portfolio.

Secondly, there is a difference in industry concentration between the two.

In terms of industry allocation, Beiying A-share New Opportunities has a more diversified portfolio, covering most of the A-share market's primary industries (15 in total), especially manufacturing and finance (see the chart below).

On the other hand, BlackRock Fund's industry allocation is relatively concentrated, with only 8 industries.

Different Investment Strategies

In terms of major holdings, the two products have different focuses.

As of the end of the second quarter, the top ten holdings of BlackRock Fund are more technology-oriented, including companies such as ZTE, Contemporary Amperex Technology, Industrial Fulian, Kweichow Moutai, Luoyang Molybdenum, JCET, Lixun Precision, Jintai Xuchuang, Changhong Technology, and China Mobile.

On the other hand, the top holdings of Beiying A-share New Opportunities seem to prioritize stability, with a focus on new energy and a significant presence in the financial, food and beverage, and real estate sectors.

According to the second-quarter report, the top ten holdings of Beiying A-share New Opportunities include 9 stocks: Contemporary Amperex Technology, Ping An Insurance, China Merchants Bank, BYD, BOE A, Gree Electric Appliances, Kweichow Moutai, ZTE, and China Construction.

In terms of investment strategies, it seems that Beiying A-share New Opportunities has better timing in the first half of the year, and this is not the first time.

Bottoming Out of Policies

According to the quarterly report of Beiying A-share New Opportunities, both the internal and external policy bottoms of the domestic capital market have already occurred. They believe that although the overall market beta situation has been weak so far this year, the A-share market is still showing a situation of stock game and multiple blossoms under the drive of economic recovery, special estimation, AI, and other themes, and there are still structural opportunities.

Such a market pattern is more conducive to the quantitative strategies of stock selection in the entire market to create excess returns. If the later economic recovery exceeds expectations and drives the improvement of market beta, then the product is expected to bring comprehensive returns of beta + alpha.