Blurred Boundaries on the "Battlefield": When Top-performing Public Funds Begin to Enter the Private Fund Arena

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Recently, a previously rare product has appeared prominently on the high-end wealth management shelf of a brokerage firm known as a “noble among brokerages,” drawing collective attention from within the industry.

It is sold alongside a group of well-known private equity quantitative and overseas hedge products, with similarities in name, strategy, and channel presentation. However, the manager is not a traditional private equity institution, but a public fund company.

In the past, public fund products dominated bank retail channels, while top overseas and domestic private equity products dominated private banking and high-end broker wealth management, and the two were clearly distinct.

But now, that divide has been breached.

As teams under public fund institutions make a “strong entry” into the traditional market of top private equity, new change is brewing.

Is this a loosening of boundaries or a rewriting of the rules of the game?

The “New Product” on High-End Wealth Management Shelves

Recently, on the high-end wealth management distribution platform of a leading brokerage, a product called China Resources Trust - Broad Fund Golden Selection No. 1 Collective Fund Trust Plan (hereinafter referred to as “Golden Selection No. 1”) made a quiet debut, displayed in a prominent position.

This product takes the form of a trust plan, no different from Ningquan, Jinglin, Gao Yi and other products also on display, but the underlying “manager (investment advisor)” is Broad Fund Management Co., Ltd.—a high-performing public fund company that has emerged in recent years.

More interestingly, this product does not appear in the public wealth management section, but is placed in the core private equity section of this distribution platform, alongside mainstream subjective long, quantitative hedge, and macro strategy private equity products.

According to the product brochure, the minimum investment for this trust plan is 400,000 yuan, which is “more or less the same” as most private equity wealth management products on the market, targeting high-net-worth clients in the traditional sense.

Public Funds “Make a Move”

It has previously been uncommon for high-end private equity distribution channels to prominently recommend private equity products from public fund institutions.

But on closer thought, it doesn’t seem to pose much issue; some public fund institutions already have private product lines—separately managed account (SMA) products—thus owning dedicated private equity management teams. If such an institution is the manager, there is little challenge in terms of management capability.

From another perspective, the product above is essentially a “standard” and common private equity product: trust channel, core high-end private equity channels, and highly “private-like” from strategy to selling points, with only the manager being a public fund institution.

This means that public institutions have truly put their core capabilities into private fund products and have carefully placed them on top brokers’ private equity distribution platforms, fundraising alongside traditional stock-picking private equity firms like Gao Yi, Jinglin, and Ningquan.

The intention behind this is well worth exploring.

Opening Up New Blue Ocean?

From the perspective of the broader market environment, the A-share market just bottomed out at the end of 2024 and began a relatively steady upward trend, offering a window for public fund institutions good at equity investing to launch new products.

From a policy perspective, on one hand, equity investment has been endorsed and vigorously promoted by regulators; on the other, public fund management fees have been cut twice and are now at a relatively low level. From a business development standpoint, seeking new platforms and channels to issue equity products is understandable.

In the design of the Golden Selection No. 1 product that has entered the core private equity circle, it is also an active equity product, focusing on broad consumption—that is, considering both currently undervalued traditional consumer stocks as well as popular emerging consumption in the market, leaving room for the portfolio manager to maneuver.

At this time, there is still a substantial “blue ocean” in high-end private equity wealth management that public funds haven’t tapped into, so their entry seems understandable.

Opportunities and Challenges Coexist

Of course, as public fund private account products enter the core broker private equity wealth management shelves, a new round of competition has inevitably begun.

From the perspective of private equity institutions, more competition is unavoidable, especially when battle-tested teams from the public fund arena enter the private equity market in earnest, which may bring new product features to this market.

Moreover, whether in terms of team composition or the financial strength of the parent institution, mid-tier public fund institutions may be no weaker than top private equity firms (though, of course, the styles of their portfolio managers cannot be substituted). This will prompt some top private equity firms to take this new competition seriously.

From the perspective of public fund institutions, entering the traditional “reserve” of private products clearly requires speaking the language of the private equity market and producing products that match the risk-return preferences of private equity clients. Integrating this with the established and strong investment styles of public funds will take significant effort.

Historically, many institutions have not made a big splash in this area for a reason, but since the move has started, it must be carried out with a considerable degree of completeness.

For sales platforms, this is clearly a great thing: more institutions and more products are always beneficial for them, as long as overall performance meets standards.

Risk Disclosure and DisclaimerThe market involves risk, and investment requires caution. This article does not constitute personal investment advice and does not take into account individual users’ specific investment goals, financial situations, or needs. Users should consider whether any opinions, views, or conclusions in this article suit their particular circumstances. Investment based on this article is at your own risk. ```