On October 22, Galaxy Fund issued an announcement that Zheng Weishan would step down from all the products he managed in a complete exit, citing "personal reasons," and would not be transferred to another position at the company. After nearly two months of speculation, the news has now been confirmed.
Zheng Weishan was Galaxy Fund's "top name" and a representative figure in hard-tech investing — the "tech Galaxy" banner rested almost entirely on his shoulders. Now that Zheng Weishan has left, who will carry the flag for Galaxy Fund?
One person shouldering 60% of equity assets
Zheng Weishan joined Galaxy Fund in October 2018. A well-known tech fund manager in the industry, he focuses deeply on the semiconductor supply chain. In May 2019, he took over the management of Galaxy Innovation Growth, and that year, with a return of 97.12%, he made his name overnight — it became his signature product.
Before his departure, Zheng Weishan managed three products with combined assets of 21.035 billion yuan, of which Galaxy Innovation Growth accounted for 19.095 billion yuan. The latest data show that Galaxy Fund's equity-type and mixed-type products together total 32.474 billion yuan. Zheng Weishan alone accounted for more than 60% — an absolute "pillar."
Wind data show that as of October 21, his tenure return on Galaxy Innovation Growth reached 284.87%, with an annualized return of 19.82%, ranking 18th out of 702 in its category. Because Zheng Weishan consistently stuck to semiconductor investing, Galaxy Innovation Growth effectively became a semiconductor-themed fund, with holdings long concentrated in the chip supply chain. In other words, 58% of Galaxy Fund's equity assets were tied to this single "semiconductor" fund.
Performance has elasticity, and risks are stark
Zheng Weishan is a classic strong-sector fund manager. His positions have long been anchored in semiconductors, without cross-industry diversification, rotating only within chip sub-sectors — an extreme style. Performance has elasticity, and the risks are equally stark. His tenure return on Galaxy Innovation Growth reached 284.87%, with an annualized return of 19.82%, but the annualized volatility exceeded 38% and the maximum drawdown was 63.84%.
A highly recognizable performance curve helped him attract a large number of retail investors. As of the end of June, Galaxy Innovation Growth had about 976,100 holder accounts, with individual investors holding 95.91% of shares. In July this year, tech stocks pulled back, and the fund's net value dropped 30.11% in a single month. Of course, this is what investors in an "all-in bet" sector fund manager must endure. With strong first-half returns, the fund saw net redemptions. In the second quarter, Class A shares decreased by about 329 million units and Class C shares by about 76 million units. On the bright side, those who exited avoided the July crash. The remaining investors may have been following Zheng Weishan the person.
Galaxy Fund faces considerable challenges
Zheng Weishan's departure did not follow industry convention. It skipped the step of first adding co-managers and then stepping down — clean and straightforward, which is good, since investors have already seen through the usual playbook and no longer buy it. What Galaxy Fund could do was to hand over with the strongest available force — all internal veterans.
Galaxy Innovation Growth will be taken over by Yuan Xi and Zhu Jianhui. Yuan Xi is a familiar face and also deputy head (presiding over work) of Galaxy Fund's equity investment department; she managed this fund from 2016 to 2019 and is taking it over again after more than seven years. Zhu Jianhui joined Galaxy Fund in April 2008 and has managed public funds for over 10 years. The other two products will be handed to Bao Wubin.
However, the new and old fund managers differ in style. For example, although Yuan Xi also heavily weights semiconductors, her portfolio also includes sectors such as new energy; Bao Wubin mainly invests in technology, but his individual stocks are diversified, unlike Zheng Weishan's extreme bet on semiconductors. Either way, the "industry standing" of the new managers still clearly lags behind Zheng Weishan's. With large scale and a high proportion of individual holders, stabilizing these retail investors will be a considerable challenge.
Galaxy Fund said in its announcement that the investment and research handover was completed before the change and the strategy remains unchanged. Another issue worth mentioning is that Galaxy Innovation Growth Mixed's long-standing performance benchmark is "CSI 500 Index return × 75% + SSE Treasury Bond Index return × 25%." Judging by the benchmark alone, this looks more like a balanced growth mixed fund, deviating from an extreme semiconductor investment. If the strategy is not changed, then the benchmark will need to be revised.
Finally, a few words about Galaxy Fund. Founded in 2002, it has now been around for 24 years. As of September 30 this year, Galaxy Fund's assets under management reached 121.280 billion yuan, up more than 12% from a year earlier. Galaxy Fund's growth has mainly relied on money market funds: in the first half, money market funds rose from 30.324 billion yuan to 56.07 billion yuan. Fixed-income products account for more than 73% of Galaxy Fund overall, and active equity has always been a weak spot. For so many years, Galaxy Fund has never cultivated a second Zheng Weishan. With Zheng Weishan gone, who will carry the flag for Galaxy Fund?
Zheng Weishan's next stop
Zheng Weishan made his name at Galaxy Fund, and the two achieved success together. In the announcement, Galaxy Fund expressed gratitude for his contributions. It is said that Zheng Weishan may have left because of compensation. After all, Galaxy Fund is a state-owned enterprise, with China Galaxy Financial Holdings holding 50%, and the salary ceiling is fixed.
According to Jiemian News, Zheng Weishan may be heading to GF Fund. Another report says he is going to a large or medium-sized fund company in Shenzhen with a securities firm background. Anyway, both point to a leading public fund in the south. MACD golden cross signals have formed, and these stocks are rising well!
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