Boshi's Bounce
China's largest mutual-fund firm weathers scandal and rises again.
WHEN AN INDUSTRY IS MATURING, the good times and bad times follow in rapid succession. So it is that in a mere decade of existence, China's mutual-fund industry already has weathered a scandal or two and is on the rise again. Its largest player is Boshi Fund Management, based in Shenzhen near the Hong Kong border, with 30 billion renminbi ($3.6 billion) under management.
That doesn't seem like much compared with the vast sums overseen by U.S. giants like Fidelity and Vanguard -- Fidelity's mammoth Magellan alone has more than $65 billion in assets -- but Boshi could have a bright future. Two big pluses: China has a raft of assets to privatize, and its nonconvertible currency means domestic investors are thirsty for alternative ways to invest their money.
Boshi helps invest China's giant social security fund. It also introduced the first open-end fund, based on the FTSE/Xinhua A200 index, catering to qualified foreign investors. (These investors are institutions that have won Beijing's stamp of approval; foreign individuals can't invest in this fund.)
About 80% of the company's assets are in five closed-end and four open-end offerings; the rest are in the national pension fund. In the aggregate, Boshi says its funds returned 25.1% in 2003, compared with 18.7% for the local industry. It won a raft of awards last year -- from Morningstar, the Shanghai Securities News and others.
Xiao Feng left a cozy berth in China's bureaucracy to form Boshi, named after an I-Ching term for "a gathering of people and a collection of money."
Boshi was born in 1998, the brainchild of Xiao Feng, then a rising official at the China Securities & Regulatory Commission, or CSRC, the mainland's equivalent of the U.S. Securities and Exchange Commission. Xiao formerly was at the People's Bank of China and Shenzhen Konka, the TV manufacturer.
Since Deng Xiaoping plunged China into capitalism, famously declaring that "to get rich is glorious," stock-market modernization has been a vital Chinese goal. Yet Xiao left China's cozy bureaucracy for an industry that was nascent and of questionable repute due to its notorious speculators. At age 36, he took the helm of his own mutual-fund shop. He named the company Boshi, after a term in the I-Ching that means "a gathering of people and a collection of money." China's big state-owned securities firms lined up to supply capital. And the firm began stacking up decent returns.
But in early 2001, disaster struck.
Chinese regulators began investigating allegations that fund managers had conspired to manipulate the prices of their holdings, buying and selling the same stocks many times between August 1998 and October 2000 to drive them higher. The CSRC censured Boshi in early 2002 and imposed administrative sanctions against some employees. In a statement, Boshi said Xiao and the other employees had accepted responsibility. Two fund managers resigned. A new CEO was put in place when the investigations began, and Xiao was relegated to vice chairman. After a year-long probe, however, he was cleared and restored as chief executive.
It was a humbling experience. But the CSRC wasn't singling out Boshi or Xiao. China has 10 fund-management outfits, and the agency found that eight of them had engaged in illegal pumping-up of share prices. But because Boshi was the biggest, it drew most of the local press attention. The investigation followed magazine reports in late 2000 about stock manipulation within China's fund industry. Thereafter, the CSRC advised fund companies to have independent directors.
Enter Yao Gang, a Xiao mentor and veteran of several prestigious think tanks, who had helped set up the Shanghai and Shenzhen stock exchanges, including Shenzhen's B-share market for foreigners. Yao also had worked in the securities industry. The two met when Xiao was employed by the People's Bank of China in Shenzhen. Yao, a friend of Xiao's boss, spotted Xiao's talent. He suggested his friend promote Xiao. Thanks in part to that recommendation, two years later, Xiao was second in command at the CSRC's Shenzhen office.
Fast forward to Boshi's troubles. The plain-spoken, strong-willed Yao was teaching at the Chinese Academy of Social Sciences and eagerly accepted Xiao's request that he help institute reforms at the company. At Yao's urging, Boshi set up five committees that set strict procedures to rein in its fund managers.
Employees could choose only from a prescribed pool of stocks, set up by standardized criteria. The company introduced professional human resources procedures, and organized auditors and a compliance department that report to Boshi's independent directors, as well as to Xiao. Each committee meets regularly, and at least two independent directors are present at each gathering. Boshi bolstered corporate governance; independent directors now play a crucial role at the company. Says Yao: "One independent director can veto everything."
Yao Gang, who answered Xiao's call to aid reforms.
As he sees it, the blame for the scandal could be placed not only on a lack of internal guidelines but also a lack of outside regulation. "Even in subsequent investigations, they've concluded at the time there were no laws that banned such practices," Yao relates. "In China, there's an expression, 'Shoot the guy who comes into the limelight first.' That fits this case perfectly."
Still, even though the investigation inflicted a personal toll on Xiao, Yao acknowledges that "this is one of the necessary episodes in the development of the Chinese fund industry. It's done enormous good for the industry, especially Boshi."
After founding Boshi, Xiao immersed himself in studying investing techniques. Soon he discovered value investing. In China, using a straight low price-earnings or high-yield strategy is difficult since companies offer dramatically high growth rates, and don't pay big dividends.
So, he began looking for companies whose returns on invested capital were promisingly high and whose prospects appeared good. In late 2002, he launched the Boshi Value Growth fund, which mainly -- but not solely -- employs a value strategy.
Hua Xiao, a skilled manager, made the strategy work. Boshi Value Growth returned 34%-plus in 2003; by contrast, Shanghai A shares returned 10%. That made its manager a star. The next year, "value investing came into fashion," Xiao crows. Now, the fund has its local imitators.
Boshi Value Growth's largest five positions include Shanghai Automotive, China Vanke (a real-estate concern), Qilu Petrochemical, Sinotrans Air Transportation Development and Shanghai Airlines, all of which figure among top holdings of the fund's parent firm, too.
In an effort to ramp up his staff's performance, Xiao introduced merit pay. In a recent presentation at a Merrill Lynch/Institutional Investor conference in New York, a panel moderator teased Xiao, noting that Boshi's vaunted $300,000 annual salaries for its managers exceed that of Boshi's chief.
Later, Xiao told Barron's: "I am not the highest-paid person in the company. I don't want to get into details, but I want to make sure professionals like fund managers and analysts, if they achieve, can get paid more than management. And I don't think $300,000 is a very big number," at least compared with the multimillion-dollar compensation packages some star American portfolio managers command.
To enhance the quality and sophistication of his staff, Xiao also began hiring foreign-trained analysts, including an economist with a doctorate from Princeton and managers who have worked at UBS Warburg, USAA Investment Management, and Invesco among others. A quarter of Boshi's employees have been educated overseas or have worked abroad.
Today, Boshi is "indisputably the best-run, the most professionally run [Chinese investment firm], and it attracts talent," says a prominent New York fund manager. And its outlook is bright, though Beijing is trying to prevent economic overheating and the A- share market has collapsed.
"The industry has nice management fees and low expenses," says Stuart Leckie, a former U.S. fund-industry executive who advises fund companies in China and is bringing out a new edition of his book Pension Funds in China. Equity funds have management fees of 1.5%; these have ranged as high as 2.5%. On the mainland, about $25 billion is invested in mutual funds, and the figure is likely to grow swiftly.
Eventually, director Yao wants Boshi to be "among the elite firms in the world." That's a tall order, yet Boshi is building its relationships; Barclays Global Investors, for example, is advising it on its index fund. For now, Yao wants to make sure that Boshi's successes don't bring in "a lot of arrogance and conceit."
What's next for Boshi?
Xiao thinks China will achieve its wished-for soft landing, given that consumer and industrial demand is so strong that it's likely to overwhelm the government's efforts to slow growth. That would be good news for stock prices, which he believes are factoring in an interest-rate increase and other negative scenarios.
Asset growth ought to clock in at 70%-plus this year. Xiao plans to launch an exchange-traded sector fund this fall. And he's looking forward to China's allowing its fund companies to manage accounts for individuals and letting people invest abroad. Boshi, he confidently expects, will be part of both these profitable trends.
博时基金──中国基金业的传奇
当一个行业逐步走向成熟时，好运和厄运会交替接踵而至。而只有短短十年历史的中国基金业也不例外，在经历几其丑闻之后它如今又继续前进了。该行业的领军人物是总部位于深圳、管理的资产规模达人民币300亿元的博时基金管理有限公司(Boshi Fund Management)。
与富达(Fidelity)和Vanguard这些美国基金业的巨擘相比，博时似乎是小巫见大巫了：单是富达旗下庞大的Magellan系列基金就管理著650亿美元的资产。不过，博时前途无量，还有两大有利因素：首先是中国有大量等待私有化的资产；其次是人民币的不可自由兑换性促使国内投资者急于寻求其他投资途径。
博时还是中国部分社会保障基金的投资管理人。该公司推出的博时裕富证券投资基金是基于新华富时中国A200指数(FTSE/Xinhua A200 Index)的开放式基金，并成为第一只被境外合格机构投资者认购的股票基金。（境外合格机构投资者是获得中国政府批准的境外投资者；境外个人投资者不能投资于该基金。）
博时旗下的5只封闭式基金和4只开放式基金吸收了公司约80%的资产，其余资产投资于中国社会保障基金。去年，博时系列基金的平均投资回报率为25.1%，而中国基金业的平均水平仅为18.7%。博时去年赢得了来自Morningstar、《上海证券报》(Shanghai Securities News)以及其他机构的无数好评。
成立于1998年的博时基金管理有限公司是现任总经理肖风的杰作。肖风当时是中国证券监督管理委员会(China Securities Regulatory Commission, CSRC, 简称：中国证监会)一颗冉冉升起的新星。中国证监会是大陆的证券市场监管机构，相当于美国证券交易委员会(Securities and Exchange Commission, 简称SEC)。肖风此前还在中国人民银行(People's Bank of China)和深圳的电视机生产商康佳(Konka)工作过。
自从邓小平提出建设具有中国特色的社会主义社会，并提出著名的“致富光荣“的口号以来，推动股市的现代化就成了中国政府的重要任务。而肖风却离开了安逸的政府机构，投身于因臭名昭著的投机行动而名声不佳的刚刚起步的基金行业。只有36岁的肖风摇身一变，成了博时的掌门人。博时取名自《易经》，寓意“汇集人才和时间“。由于国内大型国有证券公司争先向提供资本，博时的投资回报率相当可观。
但是在2001年早些时候，灾难降临了。
政府监管机构开始调查关于基金经理们互相勾结，操纵投资股票的价格的指控，尤其是在1998年8月至2000年10月之间多次买卖同一只股票，人为炒作股票的行为。中国证监会在2002年早些时候公开谴责博时，并对一些员工给予了行政处罚。博时在一份公告中声称，肖风及其他一些员工对此负有责任。于是，两位基金经理辞职了；新的总经理在有关调查开始时上任了，肖风则被降为副董事长。但在经历了长达一年的调查后，他被证明是无辜的，并官复原职。
这是一段不堪回首的岁月，不过中国证监会的矛头不仅仅针对博时和肖风。在当时总共10家基金管理公司中，证监会发现其中8家非法抬高股价。由于博时是业内的龙头老大，国内媒体自然把注意力放在了它的身上。证监会调查的导火线是杂志在2000年晚些时候载文揭露中国基金业操纵股价的黑幕。因此，证监会规定基金公司必须设立独立董事。
于是姚钢进入了公众的视线，他是肖风的导师，也是几家知名思想库的资深专家，参与创建上海及深圳的证券交易所以及深圳的B股市场。姚钢还拥有证券业的从业经历。两人是在肖风在中国人民银行任职时认识的。作为肖风上司的朋友，姚钢发现了肖风的天赋，于是提议加以提拔重用。在姚钢的推荐及其他因素的作用下，肖风于两年后被提为中国证监会派驻深圳的第二号负责人。
救火队员来了。这位直言不讳、意志坚定的专家当时任教于中国社会科学院(Chinese Academy of Social Sciences)，他二话没说就答应了肖风的请求，协助改革博时。在姚钢的推动下，博时成立了5个专门委员会，制定了严格的制度来管理基金经理。
博时的基金经理们只能对根据统一标准筛选出来的股票进行选择性投资。该公司还引进了人力资源专家，并成立了向独立董事负责的内部审计核查部门。所设立的5个委员会定期会面，而且每次开会必须有至少两名独立董事到场。博时加强了公司治理；独立董事们目前在公司发挥著重要作用。姚钢表示：“一位独立董事就能否决一切。“
姚钢认为，暴出丑闻的原因不仅是基金公司疏于内部管理，而且还包括缺乏外部监管制度。他指出，即使在随后的调查中发现了问题，监管机构也找不到禁止操纵股价的相关法律。“中国有句俗话叫枪打出头鸟，套用在博时身上再合适不过了，“他说。
不过，尽管调查使肖风个人受到了冲击，姚钢也承认“这是中国基金业发展中的必然插曲，整个行业，尤其是博时都会受益匪浅。”
在建立博时之后，肖风就埋头钻研投资技巧，并很快发现了价值投资法。在中国直接运用本益比和高收益策略是行不通的，因为拥有高增长率的企业往往不会支付高额股息。
因此，肖风开始关注那些资本投资回报率不错，同时前景光明的公司。在2002年晚些时候，他推出了以价值投资策略为主的博时价值增长基金。
作为博时价值增长基金的经理，肖华成功地运用了价值投资策略。该基金去年的投资回报率超过了34%；相比之下，上海证交所A股股票的投资回报率仅为10%，于是肖华一下子成了明星。“价值投资成了主流，”肖华宣称。该基金目前有不少效仿者。
博时价值增长基金的前5大投资对象包括上海汽车股份有限公司(Shanghai Automotive Co. Ltd., 600104.SH, 简称：上海汽车)、万科企业股份有限公司(China Vanke Co. Ltd., 000002.SZ, 简称：万科)、中国石化齐鲁股份有限公司 (Qilu Petrochemical Co. Ltd., 600002.SH, 简称：齐鲁石化)、中外运空运发展股份有限公司(Sinotrans Air Transportation Development Co. Ltd., 600270.SH, 简称：外运发展)以及上海航空股份有限公司(Shanghai Airlines Co. Ltd., 600591.SH, 简称：上海航空)，它们也是博时基金管理有限公司的主要投资对象。
为了鼓励员工再接再励，肖风引进了绩效工资制度。不久前在纽约举行的美林/机构投资者会议上，一个小组讨论的主持人调侃肖风，指出博时投资经理们的年薪高达30万美元，比这位总经理的薪资还高。
肖风私下向本刊表示，“我不是公司里薪资最高的人。我不想透露细节，但我想明确一点：如果基金经理和分析师等专业人士表现出色，他们的薪资完全可以超过管理层。我认为30万美元并不是一个天文数字“，至少与美国一些优秀的投资经理相比，他们的年薪动辄上百万美元。
为了提高员工的整体素质和能力，肖风还开始聘用拥有海外教育背景的分析师，其中包括一位获得普林斯顿大学(Princeton)博士学位的经济学家以及曾在瑞银华宝(UBS Warburg)、USAA Investment Management和Invesco等机构工作过的主管。博时四分之一的员工接受过海外教育，或是拥有海外工作经历。
一位知名的纽约基金经理说，如今，博时无疑是中国经营得最好的、最为专业的投资公司，它吸引了各路人才。博时的前景也是美好的，虽然北京试图遏制经济过热的举措以及国内A股市场的大幅下挫产生了一些不利影响。
曾担任美国基金公司主管、现为中国基金公司顾问，还带来自己新作《退休基金》(Pension Funds)的斯图尔特?莱基(Stuart Leckie)说，基金业的管理费较高，而支出较低。股票基金的管理费为1.5%，最高可达2.5%。在中国大陆，约250亿美元的资金投资于共同基金，并有可能快速增长。
姚钢希望博时最终成为“全球一流公司“。这是个非常高的要求，不过博时正在不断扩大合作伙伴。例如，Barclays Global Investors目前担任博时的指数基金顾问。姚钢眼下的期望是成功不会让博时变得骄傲自满。
博时下一步会怎样？
鉴于消费需求和行业需求依然强劲，肖风认为中国经济将如人们所愿实现软著陆。这对股市来说是好消息，肖认为股市目前正在消化加息预期等负面因素。
今年的资产增值幅度应当达到70%以上。肖风还计划在今年秋天推出一个交易型开放式指数基金。他同时希望中国政府允许国内基金公司为个人理财，并允许人们投资于海外金融市场。他满怀信心地期待博时能从中受益。
