Era Ends for China’s Legendary Stock Picker

Investors who closely followed the stock picks of one of China’s most successful brokers are wandering in the wilderness—and wondering what will happen next to their unemployed luminary Wang Yawei.

In April, and without warning, Wang resigned from his position as a star public funds manager for China Asset Management Co. Ltd. He’d spent fourteen years with ChinaAMC, one of China’s largest asset management firms, scoring huge returns on equities investments.

Wang’s gains were particularly remarkable after 2005, when he was put in charge of one ChinaAMC fund, whose return on investment from mid-2006 to mid-2011 topped all Chinese stock funds at 890 percent, according to financial data provider Wind Information Co. Ltd.

Wang’s investment strategy consistently drew attention for profits that far outdistanced his funds’ peers. Retail investors followed his bets, and media reports about his funds’ holdings sparked copycat buy orders.

“Wang Yawei has often been deified,” said a senior securities investor.

But the limelight may have overwhelmed Wang, contributing to his decision to pause.

A week after tendering his resignation, Wang told reporters he didn’t really like all the attention. He said he’d been thinking about leaving ChinaAMC for a long time, and blamed the pressure that came with his stardom for the decision to quit.

Riding the Wave

Wang’s career changes paralleled those of ChinaAMC, which was founded in 1998. The year after he was put in charge of the funds that made him famous, the state-owned broker CITIC Securities started a gradual takeover of ChinaAMC.

By September 2007, ChinaAMC had become a full-fledged subsidiary of CITIC Securities. Soon afterwards, though, government regulators ruled the team-up was too big for the industry and ordered a partial divestment.

The scaleback took effect in 2011—Wang’s last year at ChinaAMC—leaving CITIC Securities with just 49 percent of the fund manager.

There has been speculation that Wang left because he was unhappy with the securities regulations that prevent public fund managers from owning equities in the firm they work for. Another market hypothesis was that his decision was connected to disputes between ChinaAMC and CITIC Securities.

But CITIC Securities has never appointed executives to ChinaAMC to supervise its operations, a CITIC source said, although the parent routinely intervenes in other subsidiaries’ management.

Still, it clashed with ChinaAMC over management compensation. ChinaAMC is well-known for generously compensating fund managers, an industry source said. And Wang’s compensation had climbed to 20 million yuan a year—making him one of the best-paid public fund managers in China.

CITIC Securities, however, thought ChinaAMC had gone too far with Wang’s paychecks. The stakeholder was also dissatisfied with the way ChinaAMC managers hold stakes in a third-party fund sales institution through an investment consultancy firm.

CITIC Securities said this arrangement would enable managers to directly benefit from ChinaAMC’s fund sales revenues through the firm under their control, against the interests of ChinaAMC shareholders.

Wang has shrugged off that sort of speculation. He told reporters that incentives are important for fund managers but added, “I’m not resigning because there are no equity incentives, and I wouldn’t have stayed just to receive equity incentives. This has nothing to do with my leaving.”

Wang said he was more concerned about returns for his funds’ clients than the scale of the funds under management. “Since it was impossible to satisfy everyone, it was best to satisfy those that had already held the funds,” he said.

He had ordered his funds to suspend subscription, after investors swarmed to the threshold of ChinaAMC. Although his tactic disappointed investors who missed opportunities to buy, analysts say it protected his fund investors’ interests.

Wang said he didn’t want retail investors to blindly follow his stock picks and take on too much risk. “This constrained my decision-making and has been my greatest investment dilemma over the past few years,” he said.

“And it was the most important reason for my leaving.”

Sterling Performance

Retail investors often lined up behind Wang’s stock picks in part because he ranked either first or the second on annual lists of China’s most profitable fund managers between 2005 and 2010. Last year, he fell from the top ten list but still had an impressive performance given the weakness in the secondary securities market.

Moreover, Wang has won a variety of honors which represent the highest achievements in China’s funds management industry.

That’s not to say everyone loved Wang. Some of his biggest critics say, for example, he could not have built such a stellar record without cheating.

As evidence, some critics point to the fact that Wang often invested in zombie and mismanaged companies on the verge of delisting. He would buy into a company just before it was taken over by another, more promising company that could use the zombie for quick access to the stock market.

Critics say he was probably tipped off before future zombie company buyouts; otherwise he would not have been able to profit so much from these risky bets.

It’s been rumored in recent years that securities regulators have often investigated Wang’s deals, although several industry sources said they’ve found no evidence.

Wang, on the other hand, has linked his success to his talents as a data analyst. His fans agree—and say investors who imitate his example can make money.

“If you look really closely for patterns specific to a certain type of stock,” said one investor who’s observed Wang’s strategy, “it’s not necessarily impossible to replicate his investment style.”

The now unemployed Wang, 41, hasn’t said where he plans to go next, although he’s denied reports that said he would embark on an overseas exploration after leaving ChinaAMC.

“I would like to take some time off to consider the next step,” he said.

Some analysts think he’ll leave the public funds industry altogether, an idea fueled by Wang’s own words. “Perhaps I won’t work in public funds anymore,” he said. “Right now, my wish is to be far away from all the attention.”

Zheng Fei and Shen Hu are Caixin staff reporters. Liu Ran is an intern reporter at Caixin.