With the deepening of population aging, pension has become a hot topic of national concern. Recently, the General Office of the State Council issued the "Opinions on Promoting the Development of Personal Pensions" (hereinafter referred to as the "Opinions"), which provided action guidelines for the implementation of the personal pension system, and a new era of personal pensions has arrived.
"Retirement investment is not only for retirement, but also for redistribution of personal income, smoothing income at different stages of the life cycle, and keeping living standards relatively stable." Cao Jianwen says. He is a FOF Fund Manager of the Asset Allocation Department of GF Fund and has rich experience in pension investment management. In his view, when we choose pension products, we must consider the investment period and risk tolerance.

Choose products based on maturity and risk preference

 
Q: When did you first learn about the pension investment?
Cao Jianwen: As early as 2014, when I worked for more than a year, I participated in the company's annuity plan, knowing that everyone has a corresponding pension account, and the funds are entrusted to professional investors for management. At that time, I began to have the concept of retirement investment, and I also paid attention to the income of my account.
In September 2016, I went to Ping An Pension Insurance as the investment manager of the quantitative investment team, responsible for the management of quantitative and FOF products. At the time, Ping An Annuity was the largest company managing enterprise annuities. During my work, I have a relatively systematic understanding of the current status, development prospects, investment strategies, and risk control of pensions.
Q: When you participated in the enterprise annuity plan, how did the people around you view pension investment?
Cao Jianwen: Many investors have a "stereotype" of personal pensions, and feel that pension investment is to guarantee capital and income, which means low risk. Let me give an example. In 2018, a pilot program of personal tax-deferred commercial endowment insurance was launched, with more than a dozen insurance companies, and Ping An is also one of the pilot companies. At that time, the company prepared three products A, B and C for everyone to choose from.
A and B are both low-risk types, but the return of A is low, and the general annualized rate of return is slightly more than 3%; the return of B is more volatile compared to A. C is a floating income product positioned at medium and high risk, and the equity percentage is around 60%. In the end, we found that most people buy A and B, and relatively few investors choose C. The main reason is that some investors have preconceived the association between "retirement" and "low risk". They have allocated too much to low-risk assets and lost long-term investment 's potential earnings.
Q: What do you think is the correct pension investment philosophy?
Cao Jianwen: When it comes to pensions, everyone always thinks that it is a low-risk investment. In fact, it is a long-term investment, and the risk appetite should be higher than that of normal funds. If we start preparing for retirement when we are young, and withdraw this money when we retire, it will be a real long-term money.
When we choose pension products, we must consider the investment period and risk tolerance. Long-term money should be invested for a long time, and should be properly allocated to products with higher expected returns when it is far from the maturity date. When the retirement date is approaching, the risk characteristics should be gradually changed. The target date fund is designed based on this principle.

Insist on doing the right thing

Q: With the deepening of population aging, pension has become a hot topic of national concern. What do you think of current pension investments?
Cao Jianwen: Pension investment is very important. Recently, the General Office of the State Council issued the "Opinions on Promoting the Development of Personal Pensions", which provided an action guide for the implementation of the personal pension system, and a new era of personal pensions has arrived.
At the individual level, pension investment is based on the objective fact that labor income declines in old age, and we reasonably distribute current income, hoping to smooth the income at different stages of life through investment, so as to ensure the living standard of the elderly. At the national level, pensions are an important indicator of a country's economic prosperity. Pensions in the United States account for more than 150% of GDP, and the average of OECD countries exceeds 50%, while pensions in my country account for less than 15% of GDP. It is urgent to develop personal pensions through the third pillar.
Q: In the field of personal pension investment, what are the advantages of the FOF category compared to other categories?
Cao Jianwen: FOF is a relatively special type of fund product. FOF mainly focuses on asset allocation. For different products, we will do asset allocation based on the risk-return preferences of consumers, so as to provide products that meet the needs of personal pensions. From the perspective of overall performance, due to the emphasis on asset allocation and secondary dispersion, the income distribution of FOF products is more concentrated than the income distribution of other fund products so as to reduce the difficulty of individual investors in choosing products.
Q: What are the characteristics of target date products and target risk products, and what kind of people are they suitable for?
Cao Jianwen: A target date fund, also known as a life cycle fund, is a type of FOF that automatically adjusts the percentage of various assets types as investors grow older. It gradually reduces the percentage of high-risk assets such as stocks as investors grow older and approach the retirement date, and instead increase the percentage of bonds and other low-risk assets.
Target risk funds, also known as lifestyle funds, are mainly characterized by maintaining relatively stable asset allocation ratios. Conservative, stable, balanced or balanced, active or aggressive, etc. generally appear in the name of the target risk pension FOF fund, which represent different types of risk levels.
Q: How do you plan your retirement investments? Along the way, how has your understanding of pension investment changed?
Cao Jianwen: One is to participate in the enterprise annuity plan, and the other is to invest in the company's target risk fund. I'm relatively early in retirement now, and most of my money is invested in equity funds.
My first experience of pension investment was to participate in the enterprise annuity plan. Later, I managed pensions in Ping An, and through continuous learning and working practices, I had a systematic understanding of pension investment. I believe the development of pensions will be the general trend, but the process could be relatively long. Developing individual pensions is the right thing to do in the long run. It is difficult to start, but we must persist in doing it.