Fullgoal makes successful transition
Category: Asia, China
CEO Dou named CEO of the Year
Fullgoal Fund Management Chief Executive Officer Dou Yuming, CEO of the Year for China in Asia Asset Management’s Best of the Best Awards, attributes the firm’s success to its people, processes, and philosophy.
Since his appointment as chief executive in August 2008, Mr. Dou has transformed the firm. The fund veteran took the reins at Fullgoal to pioneer quantitative investment in the aftermath of the global financial crisis (GFC) in 2008. Mr. Dou also successfully led the firm through the transformation of its business model from single-strategy to multi-strategy.
“When Fullgoal made a study of foreign fund houses’ operations in the course of mapping out its future strategy four years ago, we were aware that active quantitative investment played a vital role in their asset allocation,” Mr. Dou says. “Mainland fund managers, in contrast, only focussed on passive index investing at that time, so we attempted to fill the void by introducing quantitative investment to China.”
Fullgoal then brought in top quantitative investment personnel from the US. The firm appointed former BGI Greater China active stock director Li Xiaowei to oversee its quantitative investment division.
“With Dr. Li’s expertise in equity risk asset management, Fullgoal’s fund products have delivered a stellar performance, with around one-third of its funds in the top fifth in its peer group for the past two years ended November 2012.”
Over the past four years, Mr. Dou has successfully transitioned the firm’s investment style from a single strategy investment team model to a multi-strategy investment team model with three main areas: fixed income investment, growth stock investment, and quantitative investment.
“In 2008, Fullgoal decided to differentiate its core business out of the equity space in search of more sustainable growth, given the volatile A-share market conditions,” Mr. Dou adds. “We apply the philosophy of active alpha investing to the three main areas. These areas with each other, and their analysis results are strongly correlated. This three-pronged strategy helped the firm to boost its roster of institutional clients to around half its client base.”
Over the coming three to four years, Mr. Dou states that the firm will prioritise deepening its product mix, creating quantitative investment funds and bond funds with various investment styles and themes, “For example, we are considering widening the investment scope for our bond funds to less liquid credits, such as private equity bonds.”
“As for the quantitative investment products, we plan to improve the absolute return capability of our enhanced index fund products, via stock index futures hedging. The firm is considering launching a quantitative investment fund in Hong Kong.”
Looking ahead, Mr. Dou remarks that the liberalisation of China’s asset management industry will pose a tough challenge for Fullgoal, “We have to ensure that our three main areas are in the top three in the market, in the face of competition from the newcomers, such as firms with banks and insurers as main shareholders.”
As for its overseas business, Fullgoal was a latecomer among Mainland fund managers seeking to break into the Hong Kong market. Its subsidiary Fullgoal Asset Management (HK) was established in late 2012.
However, Mr. Dou explains that the advantage for the first movers is very marginal, as the financial market has a different focus in Hong Kong, “We saw that our peers mainly benefited from accessing RQFII ETFs, which is not the core business for Fullgoal.”
“Rather, the firm has a competitive edge in absolute quantitative investment and credit bonds, compared to its rivals. Therefore, we preferred to wait for our investment capabilities to be competitive for overseas investors.” He adds that the Hong Kong office will play a key role in increasing the group’s overseas exposure and extending its investment capabilities abroad.
With more than 18 years of experience in securities investment, Mr. Dou observes that the industry landscape in the Mainland is evolving rapidly. The long-term fundamental approach for mutual funds has diverged from the approach of local private equity and venture capital funds.
“The investment horizon of mutual fund investors is much shorter than PEs and VCs, at around six months to two years. Therefore, mutual funds cannot employ the approach of simply assessing the fundamentals of an individual firm: they also have to take factors such as market trends, investor sentiment, and competitor strategies into consideration.”
Mr. Dou remarks that he only focussed on ‘processes’ at the start of his career, but now he realises ‘philosophy’ and ‘people’ are more critical to the success of a fund manager.
Between September 2010 and September 2012, the AUM of publicly offered mutual funds managed by Fullgoal has grown from RMB 58.61 billion (US$9.3 billion) to RMB 67.88 billion, significantly outperforming the average growth of 2.22% for the Mainland fund industry in the same period.
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