50 billion yuan of insurance funds, private equity with paid up share capital of 32 billion yuan, mainly invested in key industries related to national economy and people's livelihood
2024-10-12
The first insurance private equity securities investment fund in China with a total scale of 50 billion yuan is operating smoothly, and more insurance private equity securities investment funds may emerge. The fund was jointly launched by China Life Insurance and Xinhua Insurance, which has innovated the long-term investment model of insurance funds, expanded the breadth and depth of insurance funds' participation in the capital market, and has a strong demonstration effect. Li Yunze, Director of the State Administration for Financial Regulation, stated that he will support other eligible insurance institutions to establish private securities investment funds and further increase their investment in the capital market. Industry insiders believe that investing in equity through private equity securities investment funds has multiple advantages, and it is expected that more insurance institutions will participate in the future. On October 11, the reporter learned from the relevant person in charge of China Life Insurance that the Honghu Fund jointly launched by China Life Insurance and Xinhua Insurance had officially started investment on March 4, 2024. Honghu Fund adheres to the operation in accordance with laws and regulations, seizes policy and market opportunities, and makes every effort to do a good job in the investment of pilot funds. As of September 30th, Honghu Fund's paid up share capital was 32.01 billion yuan, mainly invested in key industries related to national economy and people's livelihood, and achieved positive results. On November 29 last year, Xinhua Insurance and China Life Insurance announced that they would jointly set up a private equity investment fund limited company, namely Honghu Fund, with a contribution of 25 billion yuan respectively. This is also the first time in China that insurance institutions have jointly established private equity securities investment funds. At the Xinhua Insurance 2024 Public Awareness Day event held on July 7th, Yang Yucheng, Chairman of Xinhua Insurance, stated that the Honghu Fund had already invested over 20 billion yuan at that time, injecting long-term stable funds into the capital market. In combination with the operation of Honghu Fund, the relevant person in charge of China Life Insurance introduced that as a pilot reform, Honghu Fund actively explored the investment law of "patient capital" in accordance with the principles of marketization, legalization and "long-term investment", and tried to form an operable and replicable investment style and strategy. One is to adhere to the investment philosophy of long-term investment, value investment, and prudent investment. This is the foundation of long-term investment and the original intention of the company's establishment. The second is to choose listed companies with obvious competitive advantages, excellent governance structures, and good business profit models, and buy and hold them for the long term. Thirdly, when the stock market is sluggish, market confidence is insufficient, and the stock prices of listed companies are mistakenly killed and sharply decline, Honghu Fund firmly buys. The fourth is to establish an investment assessment and evaluation system that is suitable for long-term investment. Honghu Fund insists on long-term investment and extends the assessment period, for example, from 1 year to 3 years. The assessment indicators should also be adjusted accordingly, focusing on the total investment return rate and taking into account the comprehensive return rate. More insurance private equity securities funds may emerge. At a recent press conference held by the State Council Information Office, Li Yunze stated that the next step will be to continue supporting the sustained and stable development of the capital market. One of the measures is to expand the pilot program for long-term investment reform of insurance funds. Based on the first insurance private equity securities fund, other eligible insurance institutions will be supported to establish private equity securities investment funds, further increasing their investment in the capital market. When talking about the significance of the long-term investment of Honghu Fund in boosting the capital market, China Life Insurance said that it was mainly reflected in three aspects: first, the structure of listed companies will be continuously optimized. As more and more investors shift their investment targets towards companies with obvious competitive advantages, excellent governance structures, and good business profit models, companies with good stock market quality will continue to be sought after by the market, while companies with poor quality will have lower market attention and gradually continue to withdraw from the market. The structure of listed companies will be optimized. Secondly, the volatility of the stock market has decreased, forming a healthy and stable development trend. When the performance evaluation of investment institutions is extended and the holding period of stocks becomes longer, the volatility of stocks will also decrease, resulting in a decrease in the overall volatility of the stock market. The performance growth of listed companies will become the main driving force of the stock market, and the improved predictability of the stock market will form a healthy and stable development trend. The third is that Honghu Fund plays a dual role in long-term investment of insurance funds and active capital markets, with strong demonstration effects. It establishes private securities investment funds for insurance institutions, supports the sustained and stable development of the capital market, and provides leading experience. Recently, large insurance institutions have stated that they are studying the establishment of private equity securities funds and the possibility of adopting this approach for equity investment. Chen Li, Chief Economist of Chuancai Securities, told reporters that insurance companies seeking diversified investments are expected to prefer investing in different asset classes through private equity funds to achieve portfolio diversification. Lu Xiaoyue, one of the founders of Yansu Asset Management, further analyzed to reporters that insurance institutions setting up private securities investment funds to participate in capital market investments can adopt the accounting method of long-term equity investment for stable market value accounting, and can use more flexible dividend methods to achieve more balanced accounting standards for investment returns. This can effectively avoid the drawbacks of direct stock investment or entrusted investment under IFRS 9 (International Financial Reporting Standard 9) rules and achieve more flexible long-term allocation of equity assets. Considering the advantages of accounting standards for insurance institutions to establish private equity securities investment funds to participate in capital market investments, large and medium-sized life insurance companies that invest more in stocks may be more eager to participate in the establishment of private equity securities investment funds. Firstly, it can alleviate the market value fluctuation pressure and investment return fluctuation pressure caused by direct stock investment. Secondly, it can better match with dividend insurance and universal insurance liabilities, achieve long-term investment, and meet the original intention of patient capital of insurance funds. Industry insiders believe that more qualified insurance institutions are expected to establish private securities investment funds in the future. Lu Xiaoyue believes that this can attract a large amount of stable insurance funds to actively participate in China's capital market, and precisely cultivate and strengthen patient capital. Based on the current proportion of equity assets in the insurance industry and combined with the current solvency situation, it is roughly estimated that there is still approximately 1.35 trillion yuan of equity allocation space in the insurance industry. (New Society)
Edit：Yao Jue Responsible editor：Xie Tunan
Source：Securities Daily
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