"Fixed Income+" turns into "Fixed Income-"? Controlling drawdowns becomes the "diamond drill" of wealth management companies

Invest in stocks with the Golden Kylin Analyst Research Reports—authoritative, professional, timely, comprehensive—helping you uncover potential thematic opportunities!

Recently, China Securities Journal reporters learned through surveys that many “Fixed Income+” financial products have experienced significant net value fluctuations, with short-term performance under pressure, leading some investors to jokingly call them “Fixed Income-.” Wind data shows that as of April 6, 204 “Fixed Income+” products had an annualized return over the past month below zero, with some products losing more than 10% in the interval.

Several wealth management firms have begun optimizing allocation strategies and strengthening drawdown controls. During this round of market volatility, some “Fixed Income+” products revealed issues such as inadequate product design and risk management, as well as a lack of contingency plans. Industry insiders believe that “Fixed Income+” financial products remain an important choice for residents to maintain steady allocations in a low-interest-rate environment. Wealth management companies need to further address capability gaps in multi-asset, multi-strategy investment fields, optimize and upgrade their research and investment systems, and improve their ability to navigate cycles.

● Staff Reporter Shi Shiyu

“Fixed Income+” products now experiencing net value fluctuations

“I purchased a ‘Fixed Income+’ product from the CMB Wealth Management Jiayue series with a minimum holding period of one year, an open-end daily product. The previous returns were quite good, but since mid-March this year, the net value has fluctuated significantly, and the recent one-month interval has been in loss,” Beijing investor Ms. Ma told reporters.

A wealth manager at a branch of China Merchants Bank in Xicheng District, Beijing, explained that from an asset allocation perspective, the product Ms. Ma purchased has a fixed income asset allocation ratio of no less than 80%, mainly invested in high-rated domestic credit bonds, with equity exposure not exceeding 20%, primarily investing in convertible bonds. “Recently, many ‘Fixed Income+’ products have experienced a correction, mainly because bond markets, stock markets, and precious metals markets have all undergone varying degrees of adjustment during the same period. Market volatility is directly reflected in the net value of wealth management products,” the manager said.

“Recently, gold prices have strengthened, so I bought a gold-enhanced fixed income product under Minsheng Wealth Management. The product’s decline over the past month was 0.47%, but I currently have no plans to redeem,” said senior investor Ms. Zhang.

“Recently, the capital markets have seen ‘stock, bond, gold’ synchronized shocks, and the net values of various ‘+equity’ and ‘+gold’ products have been under short-term pressure. We are actively managing the drawdowns,” said a research and investment head at a wealth management firm in East China.

Wind statistics show that as of April 6, among all “Fixed Income+” products with disclosed latest net values, 204 had a negative annualized return over the past month, while only 52 had a negative annualized return over the past three months.

The Union Zhuping·Public Fund Wealth Management Weekly reported that from March 21 to March 27, the average annualized return since inception of fixed income public fund products decreased by about 2.79% month-over-month; the number of public fund products breaking net value also increased by approximately 29.10% month-over-month.

“Recently, there has been a noticeable increase in investors asking about net value changes. Currently, the net value declines are within controllable ranges. Last year, we also saw simultaneous declines in stocks, bonds, and commodities, but after shocks, the market tends to return to fundamentals, and the phased declines will be recovered,” added the aforementioned wealth management manager from China Merchants Bank.

Many bank wealth managers advise that, in the face of phased declines in wealth management product yields, investors should remain patient and avoid emotional reactions based on short-term fluctuations.

Product design and risk control reveal shortcomings

Apart from external macro disturbances, many industry insiders believe that the tightening of liquidity and institutional rebalancing have amplified the current market volatility.

Huijin Wealth Management stated: “Factors such as end-of-quarter tax payments, cross-quarter reserve preparations, and net liquidity withdrawals in the open market have marginally tightened the funding environment. Meanwhile, ahead of the March 31 insurance industry assessment, some insurance funds and ‘Fixed Income+’ products, aiming to stabilize indicators and prevent drawdowns, have temporarily reduced equity positions, which accelerates market declines through negative feedback loops.”

Under the current market environment, many wealth management firms are actively controlling drawdowns and reasonably adjusting asset allocations.

“Each ‘Fixed Income+’ product line we manage has strict drawdown control standards. In response to recent market volatility, we strictly adhere to investment discipline, controlling duration and leverage. Additionally, under the core goal of managing drawdowns, we actively seek investment opportunities amid market fluctuations,” said a multi-asset investment executive at a wealth management firm in East China.

ICBC Wealth Management stated that the company has established a layered drawdown target-based product control mechanism, enabling full-chain, full-cycle management of “Fixed Income+” products, with standardized and goal-oriented management to ensure clear objectives, stable styles, and strict quality control across all product lines.

Zhejiang Silver Wealth Management said that in response to recent extreme market conditions, the firm closely monitors macro trends, geopolitical developments, and asset volatility logic, driven by “research + technology,” dynamically optimizing asset allocation, actively managing equity and gold positions, and striving to reduce volatility impacts, leaving ample room for net value recovery.

It is worth noting that during this market correction, some “Fixed Income+” products’ profit enhancement and risk hedging strategies seem to have failed, exposing research and development shortcomings. Wind data shows that as of April 6, 10 “Fixed Income+” products had a monthly annualized return drop of over 10%.

“Under the current market shocks, the internal drawdowns of ‘Fixed Income+’ products vary significantly due to differences in product types, risk levels, asset structures, and strategies,” said Wang Yifeng, Chief Analyst of Financial Industry at Everbright Securities.

Zeng Gang, Chief Expert at the Shanghai Financial and Development Laboratory, believes that the sharp net value declines of some “Fixed Income+” products reflect the real challenges faced by multi-asset allocation logic. “When A-shares, gold, bonds, and other assets are under simultaneous pressure, the original risk hedging mechanisms are greatly weakened, exposing deficiencies in product design and risk management. This indicates that some wealth management firms lack sufficient judgment of asset correlations during extreme market conditions and do not have adequate contingency plans,” Zeng said.

Strengthening refined management

Several industry insiders analyze that this round of market adjustment is more a phase correction driven by liquidity tightening and emotional disturbances rather than a reversal of fundamental trends.

Zeng Gang believes that, from a market nature perspective, the current changes should be understood as a deep correction within a bull market rather than a trend reversal. Looking ahead, although investors should remain cautious in the short term, the long-term effect of combined stock and bond allocations will gradually become apparent. Wealth management funds are increasing their equity market allocations, gradually becoming a sustained incremental capital in the capital markets. This path is increasingly clear, with an expected annual incremental fund scale between 150 billion and 250 billion yuan.

Agricultural Bank Wealth Management states that the recent market adjustment mainly stems from short-term panic, rather than substantive changes in fundamentals. Although geopolitical risks remain, the equity markets will ultimately revert to their own logic. Extreme risk aversion will gradually dissipate over time, and geopolitical disturbances will have limited impact on medium- and long-term trends. The market is expected to gradually accumulate repair potential amid volatility, and once risk sentiment is fully released, a stabilization and rise are likely.

Industry insiders say that “Fixed Income+” products are an inevitable choice for wealth management firms in a low-interest-rate environment. However, these firms still have lessons to learn in exploring multi-asset, multi-strategy investments, and need to further optimize research, contingency plans, and refined risk controls.

Zeng Gang recommends that the next steps for wealth management firms should focus on three aspects: first, deepen asset-side research capabilities, moving beyond reliance on historical correlation data to establish dynamic tracking mechanisms to anticipate changes in asset correlations; second, strengthen risk management discipline, strictly controlling duration and leverage, prioritizing high-rated, highly liquid assets, and limiting low-quality credit bonds; third, establish comprehensive net value fluctuation warning mechanisms, flexibly adjusting positions based on market conditions, increasing allocations to certificates of deposit and short-term bonds to smooth volatility. Additionally, wealth management firms should enhance cooperation with public funds, securities firms’ asset management, and other institutions through “in-house + outsourcing” models, leveraging them as key alpha strategy providers to address their own shortcomings in equity and multi-asset investment capabilities.

Wang Yifeng believes that the banking wealth management industry should build a more refined risk control system, establishing a full-process management system covering “risk budget – risk contribution – risk adjustment,” and improve drawdown control through measures such as setting asset crowding warnings and incorporating tail risk modeling; optimize alternative asset allocation, flexibly use hedging tools; and, oriented toward improving customer experience, promote detailed tiered product structures; strictly distinguish between conservative and aggressive “Fixed Income+” products, and implement more professional, refined operational management based on product risk budgets and customer risk preferences.