Core Viewpoint - The current favorable conditions for broker asset management relying on city investment bonds are expected to last only for about a year, as credit spreads are rapidly compressing, leading to a decline in the performance of fixed-income investment managers [1][2]. Group 1: Market Conditions and Trends - The strategy of holding low-credit city investment bonds to maturity has been widely adopted by broker asset management firms, relying on bond yields and a bull market for bonds to achieve excess returns [3][4]. - Since 2022, the market for city investment bonds has been evolving along two main lines: a continuous decline in risk-free interest rates and increased constraints on local government debt issuance, leading to extreme compression of credit spreads [6][7]. - As of now, high-grade long-term city investment bond yields have entered the "2" era, with yields for AAA-rated bonds under three years dropping to the "1" range [7]. Group 2: Challenges Faced by the Industry - The fixed-income investment sector is facing three major challenges: a sharp decline in static returns, passive duration extension leading to significant net value fluctuations, and intertwined credit and liquidity risks due to tightening city investment policies [8][9]. - The reliance on city investment bonds is becoming increasingly difficult to meet the performance benchmarks set by banks, with expectations that many fixed-income products will fail to meet these benchmarks starting next year [10]. Group 3: Transformation and Strategic Shifts - Broker asset management firms are undergoing a transformation to diversify their investment strategies, moving from a reliance on city investment bonds to a multi-asset and multi-strategy approach, including domestic and international stocks, commodities, and bonds [2][11]. - The industry is seeing a significant increase in the issuance of Fund of Funds (FOF) products, with 52 firms having issued a total of 405 FOF products as of July 30, indicating a shift towards more diversified asset management strategies [17][18]. - Successful transformation in the broker asset management sector will likely depend on talent and differentiation, with firms needing to leverage their comprehensive capabilities and deep market knowledge to provide customized solutions [12][19].

Core Viewpoint - The current favorable conditions for broker asset management relying on city investment bonds are expected to last only for about a year, as credit spreads are rapidly compressing, leading to a decline in the performance of fixed-income products and potential job losses for fixed-income investment managers [1][4][10]. Group 1: Current Market Conditions - The strategy of holding low-credit city investment bonds to earn management fees is becoming less viable due to extreme compression of credit spreads [1][4]. - The fixed-income investment managers are facing a significant decline in business opportunities, with expectations of widespread underperformance in fixed-income products starting next year [1][10]. - The yield on high-grade long-term city investment bonds has dropped significantly, with 3-year AAA-rated bonds now yielding in the "1" range [8][9]. Group 2: Historical Context and Strategy Shift - Historically, broker asset management relied heavily on city investment bonds due to their government backing and low default risk, especially after the 2016 supply-side reforms led to widespread defaults in corporate bonds [5][6]. - The past decade saw investment managers achieving over 6.4% annualized returns with minimal volatility by primarily investing in city investment bonds [4][7]. - The transition to a more diversified asset strategy has begun, with a shift from city investment bonds to a multi-asset approach that includes domestic and international stocks, commodities, and bonds [3][11]. Group 3: Challenges and Future Outlook - The fixed-income sector is facing three major challenges: a sharp decline in static returns, increased duration risk, and intertwined credit and liquidity risks [9][10]. - The asset management industry is expected to undergo significant transformation, with successful firms likely to be those that can differentiate themselves and leverage talent effectively [11][12]. - The growth of FOF (Fund of Funds) products is seen as a strategic move to adapt to changing market conditions, with a notable increase in issuance from 2021 to 2024 [16][18].