Bank Intensive Redemption of High-Yield Preferred Shares Creates "Direct Substitute" Dilemma for Institutional Asset Management Allocation

People’s Financial News, March 17 — Securities Times reporters have noted that since last year, with the continued decline in interest rates on new issues of Tier 2 capital bonds, perpetual bonds, and other capital instruments, an increasing number of banks are proactively redeeming their existing high-yield preferred shares. Last year, nine banks redeemed over 100 billion yuan worth of domestic and overseas preferred shares, further shrinking the outstanding market size. Experts say this move is a practical choice for commercial banks to “redeem old and issue new” in order to optimize capital structure and reduce financial costs. Preferred shares, as equity assets that provide coupon income, are currently an important allocation category for public funds, bank wealth management, insurance funds, and other asset management institutions. However, as the scale of existing preferred shares continues to decline and coupon yields further decrease, the market will find it difficult to identify “substitute” assets in the future. From the perspective of transforming equity investments, some wealth management investment managers believe that returns can be enhanced through diversified asset allocation and richer investment strategies. The approach should not be limited to simply increasing equity assets but should also include more complex strategies such as quantitative neutral, commodities, derivatives structures, and cross-border assets. This trend is not a short-term behavior but a necessary path for wealth management businesses to evolve from the “fund pool – asset pool” model toward true asset management.