Jointly initiated by China Life Insurance and New China Life Insurance, the 50 billion Honghu Fund appears in the top ten shareholders' list of Inner Mongolia Yili Industrial Group and Shaanxi Coal Industry, with shareholding ratios of 1.88% and 0.72% respectively. From an investment perspective, the Honghu Fund prefers to invest in high-quality large market cap blue chip stocks, especially those with high dividend rates.
On October 31st, Cailianshe (Financial Association) News (Reporter Wang Hong) With the release of the third-quarter reports of listed companies, the investment dynamics of 'long money' have also emerged. The journalist of Cailianshe noticed that the 50 billion Honghu Fund jointly initiated by China Life Insurance and New China Life Insurance appeared in the top ten shareholders' lists of Inner Mongolia Yili Industrial Group and Shaanxi Coal Industry, with shareholding ratios of 1.88% and 0.72% respectively.
Industry insiders mentioned that from an investment perspective, the Honghu Fund prefers to invest in high-quality large market cap blue chip stocks, especially those with high dividend rates. A relevant person from China Life Insurance also mentioned earlier that the Honghu Fund selects listed companies with distinct competitive advantages, excellent governance structures, and good commercial profit models for buying and long-term holding. Recently, regulatory announcements have shown support for eligible insurance institutions to establish new private equity investment funds, increasing market entry and stability efforts. Experts predict that there will be more insurance private equity funds launched in the future.
Already holding positions in Inner Mongolia Yili Industrial Group and Shaanxi Coal Industry, preferring high-quality large market cap blue chip stocks.
To further promote the resolution of the 'long money short allocation' issue for insurance companies, China Life Insurance and New China Life Insurance jointly initiated the establishment of the Honghu Zhiyuan (Shanghai) Private Equity Investment Fund Co., Ltd., with a total size of 50 billion yuan, and officially launched investments on March 4, 2024. As of September 30, the Honghu Fund had a paid-in capital of 32.01 billion, mainly invested in key industries related to national economy and people's livelihood, achieving positive results.
The journalist of Cailianshe noticed that in the recent disclosure of third-quarter reports, the Honghu Fund appeared in the top ten shareholders' lists of Inner Mongolia Yili Industrial Group and Shaanxi Coal Industry.
Specifically, as of October 31, Honghu Zhiyuan (Shanghai) Private Equity Investment Fund Co., Ltd. held 0.11938 billion shares of Inner Mongolia Yili Industrial Group, accounting for 1.88% of the total share capital of the company, ranking 7th among the top ten shareholders of Inner Mongolia Yili Industrial Group. The nature of the shares held by Honghu Zhiyuan is publicly traded A-shares, meaning these shares can be freely traded on the secondary market without restrictions from lock-up conditions. Additionally, Honghu Zhiyuan (Shanghai) Private Equity Investment Fund Co., Ltd. also became the tenth largest circulating shareholder of Shaanxi Coal Industry in the third quarter. As of October 31, Honghu Zhiyuan (Shanghai) Private Equity Investment Fund held 70.1623 million shares of Shaanxi Coal Industry, accounting for 0.72% of the circulating A-shares, with a year-end reference market value reaching 1.935 billion yuan.
In addition, Honghu Zhiyuan (Shanghai) Private Equity Investment Fund Co., Ltd. also became the tenth largest circulating shareholder of Shaanxi Coal Industry in the third quarter. As of October 31, Honghu Zhiyuan (Shanghai) Private Equity Investment Fund held 70.1623 million shares of Shaanxi Coal Industry, accounting for 0.72% of the circulating A-shares, with a year-end reference market value reaching 1.935 billion yuan.
Jufeng Investment senior investment adviser Yu Xiaoming told Caixin reporters that, judging from the investments in Inner Mongolia Yili Industrial Group and Shaanxi Coal Industry, Honghu Fund prefers to invest in high-quality large-cap blue-chip stocks, especially those with high dividend yields. Both companies are large blue-chip enterprises in the industry, with a significant market capitalization, good liquidity, and high market influence.
The investment direction of Honghu Fund is very clear, mainly focusing on key industries related to national economy and people's livelihood, such as infrastructure, medical health, green energy, and other areas. These industries will take on important social responsibilities in future development, especially in promoting sustainable development, Yu Xiaoming stated.
Leveraging the advantages of insurance funds, there may be additional insurance private equity entering the market later on.
What are the stock selection criteria of Honghu Fund? A relevant person from China Life Insurance stated that as a pilot for reform, Honghu Fund selects listed companies with obvious competitive advantages, good governance structure, and a sound business profit model for buying and long-term holding. In addition, when the stock market is sluggish, market confidence is insufficient, and the stock prices of listed companies are significantly underpriced, Honghu Fund firmly buys in.
Zhou Jin, a partner at PwC China's Financial Services Management Consulting, told Caixin reporters that several insurance companies jointly establish private equity investment funds. Insurance funds invest in secondary market stocks through private equity fund companies, which can be classified as long-term equity investments under current accounting standards and accounted for using the equity method, thus avoiding the profit fluctuations brought about by the market value accounting method for direct stock investments.
Due to the advantages of long-term value investment by insurance funds, insurance funds can increase their allocation to investment targets that are in an industry trough and undervalued, as well as to enterprises with long-term development space and appreciation potential. From the perspective of long-term asset-liability matching and investment returns across cycles, insurance funds can increase allocation and hold for the long term. This not only achieves higher long-term investment returns but also significantly improves the multi-level resource allocation function of the capital market, Zhou Jin further stated.
Caixin reporters noted that Li Yunze, director of the Financial Regulatory Bureau, recently stated at the opening ceremony of the Financial Street Forum Annual Meeting that they support eligible insurance institutions in establishing private equity investment funds, increasing efforts to stabilize the market. "This means there will be more insurance private equity funds in the future," Zhou Jin believes.
