In the financial landscape of 2023, there has been an exceptional surge in the issuance of "Qualified Domestic Institutional Investor" (QDII) products, with over 400 notices related to premium risks already released this yearThis frenzied activity highlights a striking trend among investors who are desperately seeking out opportunities in a persistently volatile marketDespite the massive interest in QDII funds, not all of them guarantee success; selecting the wrong investment can lead to disastrous outcomesWhile certain funds have managed to achieve returns upward of 30% in the first half of the year, others found themselves in perilous straits, grappling with losses nearing 30% during the same time period.

Particularly, QDII funds heavily invested in technology stocks, such as Nvidia, have experienced substantial gains, effectively "taking off" during the first half of the year

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In contrast, funds focused on industries labeled as "long lanes with thick snow," a metaphor for those perceived to have long-term growth potential, found themselves stumbling deeper into market declines, increasingly stuck in a loop of buying assets that continued to depreciate.

A prime example is the pharmaceutical industry, long seen as a "strong bull market" with enormous potentialThe industry enjoyed a remarkable two-year uptrend beginning in 2019, only to hit a peak in 2021 and collapse into an extended downturn that continues to afflict investors nearly three years laterThe pharma sector has faced significant valuation declines due to anti-corruption measures, collective procurement initiatives, and even pandemic realitiesAmidst these challenges, discussions about reversing trends in this sector proliferated, yet the CSI Medical Index continues to hover close to its lowest point in nearly a decade, leaving behind a trail of undisclosed investor losses.

The specifics of how QDII funds invested in the pharmaceutical sector fared align closely with this narrative

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Many of these funds, particularly those launched during market peaks, have been beset by underperformance almost since their inceptionPassive funds tracking the sector have highlighted this struggle, particularly those with significant investments in A and H sharesIn scrutinizing funds that experienced the sharpest declines in the first half of the year, their strict adherence to these indices reveals just how tightly their fortunes are tethered to market movements.

With passive funds often mirroring indices like the Hang Seng Hong Kong-listed Biotech Index and the Hang Seng Healthcare Index—which plummeted by 27.77% and 27.6%, respectively—it's evident that low valuations alone do not dictate a recoveryInvestors remain hopeful for some form of mean reversion, yet pharmaceutical QDII funds languish, with a notable exception for those exploring overseas marketsFor instance, the Huitianfu Global Healthcare Fund surged by 12.36% in the first half of the year, striking a stark contrast with its peers.

Analysis of the fund's quarterly data reveals a keen focus on American stocks, with a staggering 81% of its top ten holdings located in US markets

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Among these, major players such as Novo Nordisk and Eli Lilly—which experienced growths of 41% and 57%, respectively—exemplify the robust performance of pharmaceutical stocks outside ChinaAdditionally, the fund includes investments in established companies like Merck and UnitedHealth, well-known for their stable profit margins and business models.

One remarkable mention is the GF Global Healthcare Fund, a passive index fund established in December 2013, which has seen consistent positive growth except for a slight downturn in 2016. It tracks the S&P Global 1200 Healthcare Index, which encompasses stocks not only from the United States but also from Europe, Japan, and Australia, showcasing major global players within the healthcare sectorAfter its initial launch, its net asset value closely followed the trajectory of the S&P 500, although the gap has since widened, with the fund delivering a relatively low volatility experience for its investors

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However, it currently has paused large-scale subscriptions.

Shifting focus to the consumer sector, another realm facing significant challenges involves what some criticize as a decline in consumer spending trendsThe recent economic downturn has nudged consumers towards a "value-for-money" mentality, leading to an increased reliance on budget shopping platforms like Pinduoduo, which at one point even surpassed Alibaba in market valuationAs consumer sentiment wanes, industry-wide pressures have cascaded, notably impacting consumption-themed QDII funds, particularly those tracking the Hang Seng Consumer Index, which faced unexpected turbulence.

Earlier in the year, the Hang Seng Consumer Index boasted a remarkable 12.74% increase, but post-May, it suffered significant corrections, ending the first half with a 6.39% declineWithin this context, three key funds stand outFirst is the Yi Fang Da S&P Consumer Index Enhanced Fund, which fell by a modest 0.82%—a better performance than the S&P Global Consumer Staples Index, which noted a 4.78% downturn

Although its long-term performance has not outpaced its benchmark, the fund’s index comprises luxury brands such as Hermès and Richemont, presenting a unique avenue for investors drawn to the assets of affluent consumers who remain less sensitive to economic fluctuations.

In a captivating twist, investment in luxury brands, particularly Hermes, Ferrari, and others, appears to blossom, acting as an alternative path for those pricing out of luxury purchasesThe fund manager, Wang Yuanchun, often contextualizes performance discussions through socio-economic lenses, emphasizing thematic insights in quarterly reports, revealing the interplay of broader market forces and consumer behavior.

Additionally, the actively managed funds like Huitianfu Global Consumption and Franklin Global Consumer Select have made strategic decisions in regional allocations, weighing factors like interest rate cycles

Given the Federal Reserve's cautious stance on future rate cuts, these funds are Bankrolling into luxury goods and real estate equities within their portfolios, betting on the elasticity of discretionary spendingFranklin's Global Consumer Select illustrates balanced diversification, drawing from traditional sectors like spirits and exploring high-growth potentials in education and retail, with standout stock Pop Mart seeing a staggering 90% surge in the first half of the year.

The current consumer market's disaggregation drives funds to consider products balancing price sensitivity with experience-driven purchasesThis dynamic has pushed funds to elevate their allocation within services that resonate emotionally with consumersUltimately, the overarching trend remains the industry's beta status; while strong individual stock performance can enhance portfolio returns, it cannot dramatically reshape the industry's direction in downturns, especially for trailblazer funds.

Regardless of whether investors opt for index tracking or actively managed funds, strategic decisions should stem from global asset allocation perspectives