In today's turbulent financial landscape, investment firms face numerous challengesThe success of an investment strategy is not merely a matter of luck or timing; it relies heavily on rigorous research, innovative strategies, and effective risk managementOne firm that exemplifies these principles is Nanhua Fund, led by He Linze, the Assistant General Manager and Director of Fixed Income InvestmentsWith a wealth of industry experience, He and his team have developed a systematic framework for duration management and diversified investment strategies that can withstand the test of fluctuating market conditions.

Duration management is a pivotal aspect of their investment approach, aiming to strike a delicate balance between risk and returnNanhua Fund's innovative strategies incorporate institutional behavior into traditional investment analyses, thereby enriching their understanding of market dynamicsThe firm emphasizes the importance of tracking multifaceted key indicators such as economic fundamentals, monetary policies, valuations, and liquidityThese critical factors paint a comprehensive picture of the macroeconomic environment, guiding investment decisions.

To illustrate, economic indicators like GDP growth rates, inflation rates, and unemployment figures directly reflect the health of the economy and provide direction for investment strategiesChanges in monetary policy—whether through interest rate adjustments or shifts in currency supply—significantly influence the cost of capital and liquidity in the financial marketsFurthermore, valuation metrics offer insights into asset pricing, helping to identify potential investment opportunitiesLiquidity indicators remain crucial for assessing market conditions and ensuring that investment portfolios retain flexibility across various scenarios.

In addition to these macroeconomic factors, Nanhua Fund delves into the cyclical patterns of institutional trading behaviorThis behavior is often swayed by market sentiment, performance evaluation cycles, and macroeconomic policies, showcasing certain predictable trends

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By analyzing these cyclical patterns, Nanhua Fund effectively tunes its strategies to synchronize with market rhythms, allowing the firm to proactively position its investment portfolios to adapt to changing conditions.

In the current market environment, where crowded positions have heightened investment risks, Nanhua Fund has adopted a "barbell" strategy for duration managementThis innovative approach involves skewing the duration distribution of their investment portfolio towards both ends—investing in a proportion of long-duration assets to secure stable long-term returns, while also maintaining a selection of short-duration assets to ensure liquidity and flexibilityThis balanced strategy becomes increasingly valuable in a climate of interest rate volatility, effectively managing exposure to riskWhen interest rates climb, shorter-duration assets can quickly mitigate adverse impacts, while longer-duration assets benefit from declining rates, leading to appreciationSuch a thoughtful combination enables Nanhua Fund to sustain portfolio integrity amidst rate fluctuations while pursuing steady investment returns.

Nanhua Fund also identifies opportunities in high-volatility instruments, such as the “Eternal Bonds” issued by large banksThese instruments pose unique trading opportunities due to their notable price volatilityThe fund has established a rigorous spread threshold management system based on historical analyses, revealing that spreads for these bonds can fluctuate between 120 and 130 basis points, and their price adjustments occur more rapidly than in other categories.

To capitalize on this, Nanhua Fund has crafted a staged operational strategy: they monitor spread levels closely, remaining passive below a specific threshold, gradually building positions within a defined range, and focusing on stabilization signals for risk-free rates above certain levelsThis meticulous strategy minimizes exposure to extreme volatility while striving to harness the excess returns arising from market mismatches.

Furthermore, Nanhua Fund implements a defensive approach to convertible bond investments, adhering to a principle of "buy low and prioritize elasticity." They focus on undervalued assets that hold a credit rating of AA+ or higher

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By diversifying holdings, setting target profit ranges, and dynamically assessing the likelihood of value corrections, their team effectively mitigates risks while seeking out high-elasticity opportunities.

In terms of industry selection, Nanhua Fund maintains a bottom-up approachThis methodology counterbalances subjective biases by filtering for securities with potential or high volatility, thereby enhancing the portfolio's return potentialThis strategic focus enables the team to identify industries and sectors capable of delivering superior performance amidst market uncertainties.

Looking ahead, Nanhua Fund acknowledges the existence of both structural opportunities and risks in the marketThey observe that convertible bonds are presently valued neutrally, with decreasing supply in primary markets coupled with recovering demand supporting long-term investment prospectsRegarding equities, the organization remains cautiously optimistic about medium to long-term trends, emphasizing the importance of dynamic position adjustments and selective stock picking to navigate uncertainties.

Through their dedication to in-depth research, continuous strategy innovation, and stringent risk management frameworks, Nanhua Fund demonstrates a commitment to advancing within the fixed-income investment sphereWhether it involves groundbreaking duration management practices or a thorough analysis of niche instruments like Eternal Bonds and convertible bonds, the firm operates with a central ethos of "protecting value through professionalism." As the investment landscape evolves, Nanhua Fund is poised to guide investors through the complexities, maintaining a steadfast focus on stability and returns.

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