In a significant shake-up in the finance world, Morgan Stanley Investment Management announced on December 13 that noted fund manager Xu Da has departed from her position due to personal reasons. This news comes during a challenging period for one of her managed funds, the Morgan Stanley Modern Service Industry Mixed Fund, which recently issued warnings indicating it might face liquidation due to dwindling assets.
Xu, who joined Morgan Stanley in July 2012, has held various roles within the organization over her 11-year tenure, including positions as a researcher and assistant fund manager. For over seven years, she has served as a fund manager, and her departure has raised eyebrows, especially since it coincides with troubling signs surrounding one of her funds.
Concern grew on December 12 when the Morgan Stanley fund announced that the Modern Service Industry Mixed Fund had been operating with net assets below the 50 million yuan threshold for 45 consecutive business days, approaching the critical point of 50 days where, according to the fund’s contract, liquidation could be triggered without the need for shareholder meetings.
This fund was officially launched on February 24, 2022, with an initial capitalization of 490 million yuan. However, as of September 30, 2023, it had plummeted to a mere 50.96 million yuan, dangerously close to the red line established for continued operation. This rapid decline raises questions about the fund's viability and the challenges faced by its management.
Interestingly, just six days before Xu's resignation, the fund appointed a new manager, Shen Jing, signaling an impending shift in leadership possibly due to the fund's precarious situation. This change suggests that Xu's departure might not have come entirely out of the blue, as the fund had faced asset depletion issues early on, experiencing significant redemptions less than two months after its launch.
The Modern Service Industry Mixed Fund's first periodic financial report revealed a dire situation. By June 30, 2022, the fund's net assets had dwindled to just over 37.99 million yuan, significantly below the critical 40 million yuan mark. Alarmingly, from April 20 to May 24, just a month post-launch, the fund recorded 20 consecutive business days of net assets dropping below 50 million yuan. This early instability led to investor uncertainty and rapid withdrawals.
In August 2022, the fund's management first alerted investors to potential liquidation risks, as it fell below the essential threshold of 50 million yuan for consecutive business days. The situation repeated itself multiple times over the subsequent months, resulting in three separate warnings communicated to investors about looming liquidation.
Despite these challenges, the fund narrowly evaded liquidation on several occasions, thanks to opportunistic institutional investors who swiftly entered and exited the fund. For instance, from September 1 to September 7, 2022, one institution purchased 30.83 million shares, only to redeem them shortly thereafter. Such maneuvers can often be seen as attempts to provide temporary liquidity or support to a struggling fund, giving it a brief respite from impending closure.
Similar patterns were observed again towards the end of 2022, where institutional investors repeatedly purchased and quickly redeemed massive portions of the fund's shares. These actions indicate a level of speculative trading around the fund, which could reflect broader market dynamics or specific strategies aimed at capitalizing on perceived opportunities.
Throughout 2023, signs of distress continued to reveal themselves. Remarkably, the same pattern of institutional backing to stave off liquidation recurred four more times throughout the year. Each time, the immediate influx of capital helped maintain the fund's viability, but the underlying issues persistently loomed large.
As December 2023 approached, the Modern Service Industry Mixed Fund was once again on the brink of liquidation, having encountered seven potential crises since its inception. Throughout these incidents, institutional investors have largely played the hero in rescuing the fund from disaster. However, with the departure of Xu Da and the recent appointment of a new fund manager, the critical question now arises: will institutional support remain? Or will the fund finally succumb to its ongoing struggles?
The implications of Xu’s exit extend beyond just one manager’s decision; they signal a potential shift in the strategic direction of the fund and raise questions about its future. Investors will undoubtedly be closely monitoring this situation, pondering the sustainability of a fund that has survived multiple scares, and whether it can navigate the turbulent waters of the investment landscape without its long-time manager.
The situation invites broader reflection on the themes of instability and resilience within fund management, particularly in volatile markets. It raises important questions for stakeholders—investors, analysts, and market watchers alike—wondering what lies ahead for the Morgan Stanley Modern Service Industry Mixed Fund and those who have engaged with it come what may.
As the finance world watches, how the new management navigates these challenges will be pivotal. The question of whether institutional investors will continue to step in and provide necessary support remains unanswered, but from past experiences, one could argue the fluctuating nature of the investment landscape may yield unexpected partnerships and solutions moving forward.