Does “Fixed Income+” turn into “Fixed Income-”? Pulling back drawdowns becomes the “diamond drill” of wealth-management companies

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Recently, China Securities Journal’s investigation found that many “Fixed Income+” wealth management products have obvious net value fluctuations, with short-term performance under pressure, leading many investors to jokingly call them “Fixed Income-”. Wind data shows that as of April 6, 204 “Fixed Income+” products had a negative annualized return over the past month, with some products experiencing losses exceeding 10% in the interval.

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

Our reporter Shi Shiyu

“Fixed Income+” products now experiencing fluctuations

“I purchased a ‘Fixed Income+’ product with a minimum holding period of one year from China Merchants Bank’s Jiayue series, which previously performed well, but since mid-March this year, the net value has fluctuated significantly, with the past month showing a loss.” Beijing investor Ms. Ma told reporters.

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

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

“Recently, the capital markets have seen ‘stocks, bonds, and gold’ moving in sync, and the net values of various ‘+ equities’ and ‘+ gold’ products have been under short-term pressure. We are actively responding to the drawdowns,” said the head of research at a wealth management company 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.

United Wisdom Evaluation · Public Fund Wealth Management Weekly reported that from March 21 to March 27, the average annualized return since inception of fixed income public fund wealth management products decreased by about 2.79% month-on-month; the number of public fund products breaking net worth increased by approximately 29.10%.

“Recently, there has been a noticeable increase in investors asking about product 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 market shocks, fundamentals tend to recover, and phased declines will be repaired,” added the aforementioned China Merchants Bank wealth manager.

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

Product design and risk control expose shortcomings

In addition to external macro disturbances, many industry insiders believe that the tightening liquidity phase and institutional rebalancing have amplified the current market volatility.

Huisheng Wealth Management stated: “Factors such as end-of-quarter tax payments, cross-season reserve preparations, and net market withdrawals in the open market have marginally tightened liquidity. Meanwhile, ahead of the insurance industry assessment on March 31, some insurance funds and ‘Fixed Income+’ products, for stability and drawdown prevention, have temporarily reduced equity positions, which accelerates market declines through negative feedback loops.”

Under the current market environment, many wealth management companies are actively controlling drawdowns and reasonably adjusting capital allocation positions.

“We set strict drawdown control assessment standards for each ‘Fixed Income+’ product line. In response to recent market volatility, we strictly adhere to investment discipline, controlling duration and leverage. Additionally, under the core goal of controlling drawdowns, we actively seek investment opportunities in volatile markets,” said a multi-asset investment manager 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, achieving 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 the face of recent extreme market conditions, the company closely monitors macro trends, geopolitical dynamics, and asset volatility logic, driven by “research + technology,” dynamically optimizing asset allocation, actively managing equity and gold positions, and making every effort to reduce volatility impacts, leaving ample room for subsequent net value recovery.

It is worth noting that during this market correction, some “Fixed Income+” products’ profit enhancement and risk hedging logic 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 impact of this market shock, the internal drawdown of ‘Fixed Income+’ products varies significantly due to differences in product types, risk levels, asset structures, and allocation strategies,” said Wang Yifeng, Chief Analyst of Financial Industry at Everbright Securities.

According to Zeng Gang, Chief Expert at Shanghai Financial and Development Laboratory, 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 companies, in pursuit of higher yields, lack sufficient judgment on the changing correlations among different asset classes and lack contingency plans for extreme market environments,” Zeng said.

Strengthening refined management

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

Zeng Gang believes that, from a market nature perspective, the current change should be understood as a deep correction within a bull market rather than a trend reversal. Looking ahead, although investors need to 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 allocation to equities, gradually becoming a sustained incremental capital in the capital markets. This path has become increasingly clear, with an estimated annual incremental fund scale between 150 billion and 250 billion yuan.

ABC Wealth Management believes that the recent market adjustment mainly stems from short-term panic, rather than substantive changes in fundamentals. Although geopolitical risks still cause disturbances in the short term, the equity markets will ultimately revert to their own operational logic. Extreme risk-avoidance emotions 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 state that “Fixed Income+” products are an inevitable choice for wealth management companies in a low-interest-rate environment. However, these companies still have lessons to learn in exploring multi-asset and multi-strategy investments, and need to further optimize and improve in research, contingency planning, and refined risk control.

Zeng Gang suggests that the next steps for wealth management companies should focus on three aspects: first, deepen asset-side research capabilities, avoiding reliance solely on historical correlation data, and establishing dynamic tracking mechanisms to predict changes in asset correlations; second, strengthen risk management discipline, strictly controlling duration and leverage, prioritizing high-rated, highly liquid assets, and strictly controlling the proportion of low-qualification credit bonds; third, establish a comprehensive net value fluctuation warning mechanism, flexibly adjusting positions based on market conditions, increasing allocations to certificates of deposit, short-term bonds, and other stable assets to smooth volatility. Additionally, wealth management firms should enhance cooperation with public funds, securities firms’ asset management, and other institutions through “self-built + outsourcing” models, making them important alpha strategy providers to compensate for 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 capabilities through measures such as setting asset crowding warnings and introducing tail risk modeling; optimize alternative asset allocation, flexibly use hedging tools; focus on improving customer experience, promote fine-grained product layering; strictly distinguish between conservative and aggressive “Fixed Income+” products, and implement more professional and detailed operational management based on product risk budgets and customer risk preferences.