The recent performance of the A-share market has been relatively stableDespite the fluctuations, the Shanghai Composite Index appears to be steadily approaching the 3100-point mark, a psychological threshold that many investors are keeping an eye on.

Several mutual funds are beginning to recover their initial investments made in 2024, hinting at a possible upswing in the marketInterestingly, some funds established earlier this year are already showing signs of profitability, which is encouraging for investors looking for returns.

01

The Rise of New Funds

Several noteworthy trends have emerged in the current fund landscape:

1. A significant portion of the new arrivals consists of index funds, numbering around 14, which constitutes approximately 78% of the total

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This striking figure reflects a growing trend among investors seeking passive investment strategies.

Index funds typically exhibit rapid portfolio building to minimize tracking errorsBy employing a strategy that mirrors the indexes, these funds tend to face less psychological pressure during market fluctuations compared to their actively managed counterparts.

As a result, many index funds quickly establish their positions, effectively capitalizing on the ongoing rebound in the market.

2. There are also several proactive funds engaging in early-stage positioning at low levels, which have started to yield returns.

Proactive funds, often characterized by a "wide entrance, strict exit" policy, manage to navigate weak market conditions more effectivelyTheir flexibility prevents premature failures in fundraising during tough times.

These funds adopting contrarian strategies during downturns have reaped the benefits of their foresight, with examples like the China Europe Chip Industry Index Fund A illustrating significant returns.

This specific fund showcased an impressive launch, being established on February 2 and witnessing net value fluctuations just a few days later

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Remarkably, by February 6, its net value had surged by 6.69%, closely following the trajectory of its benchmark index.

Moreover, this fund began its operations at a historical low for the index, enhancing its potential as the AI sector started gaining momentum in mid-February, subsequently boosting the fund's performance to a notable 23.97% year-to-date return.

Proactive funds are often financed by the fund companies themselves, meaning the focus is less on fundraising amounts and more on sustainable performance and attracting investor interest.

When the market's turning point remains uncertain, it's vital for fund companies to align their interests with investors and share risksThis preparedness ensures that viable products are available when the market begins to climb.

3. Numerous thematic funds have launched during favorable market conditions, witnessing significant surges.

An analysis of newly issued funds by return rankings reveals that many are closely related to areas such as artificial intelligence, big data, and semiconductors, which are currently attractive sectors for investment.

Surprisingly, the Huaxia CSI Hong Kong-Shenzhen Gold Industry Stocks ETF performed exceptionally well, capturing a hefty portion of the market's rally from February 1 to mid-March, achieving a 21.03% return since the beginning of the year.

Another unexpected entry on the list was the Xiangcai Xiner Bond A Fund.

A deeper look into this fund revealed a net value increase of 14.13% on January 30, likely tied to massive redemptions by institutional investors.

Institutional fund designs sometimes entail unsustainable redemptions, creating phenomena like abrupt spikes in net value as the fund's assets are both impacted and recalibrated when faced with significant withdrawals.

02

Who Leads the Charge Among Active Equity Funds?

Shifting gears, it’s time to focus on the more widely scrutinized active equity funds.

Given that most of these funds were established this year and lack extensive public data, we shall examine a few notable examples.

One fund, which I believe exemplifies quick positioning, was established on January 18 and began experiencing value fluctuations by January 26.

Upon comparing fund manager Lu Ben's assorted equity funds, it's evident that Huaxia Rui Xin You Xuan and Huaxia Xing An You Xuan have shown consistent findings over the past year.

However, it's crucial to note that Huaxia Xing An You Xuan is classified as a balanced fund, where stock investments constitute 20%-65% of the assets, suggesting that its current stock holdings are nearly maxed out.

On the other hand, Huaxia Rui Xin You Xuan is a more aggressive hybrid fund, allocating 60%-95% of its assets to stock investments, raising its risk profile accordingly.

The previous years have shown Huaxia Xing An You Xuan embracing a balanced growth style, with its top ten stock allocations making up 38.48% of the fund, showcasing a broader diversity in stock selection.

Yet, this information remains merely speculative until we receive the first quarter report from Huaxia Rui Xin You Xuan this year.

Fund manager Lu Ben has been nurtured within the Huaxia Fund since graduation in 2011, rising to become a formidable manager of multibillion-dollar funds.

His investment strategy is diverse and adaptive, allowing him to seize opportunities across various sectors based on industry trends, tactical rotations, and beta returns.

Another particularly impressive example was Li Li's Fuguo Value Discovery Fund, which has notably stood out amidst the prevailing focus on relatively high-growth themes, making its success a noteworthy achievement.

This fund initiated its setup at impressive speed on February 6 and quickly began seeing net fluctuations by February 8, effectively positioning itself at the market's bottom during this upswing.

However, it appears that Li Li subsequently reduced the fund's exposure, resulting in a relatively flat net value curve until March, aligning closely with another fund under her management, Fuguo Research Select.

This strategy aligns neatly with Li Li's risk-averse investment philosophy, prioritizing absolute returns in her role as a fund manager.

Li Li emphasizes valuation and has a preference for contrarian investments that capitalize on market downturns, believing firmly in mean reversion.

It is also worth noting the emergence of a few novice fund managers, such as Zhou Hao from Dongxing Fund and Yan Yang from Guoshou Anbao Fund

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Their relative inexperience presents an interesting narrative as we observe their ongoing performance.

03

In Bull Markets, Choose Established Funds; In Bear Markets, Opt for New Ones

Experienced investors may be familiar with the principle, "Buy old funds in a bull market, buy new funds in a bear market."

The rationale behind selecting established funds during bullish trends lies in the time needed for new funds to build positions—risks may arise if these funds inadvertently purchase at market peaks, while older funds already carry a higher stock allocation.

Conversely, in bear markets, new funds avoid historical allocation burdens, allowing them greater flexibility when seizing market timingEstablishing positions at lower levels leads to potentially quicker gains once conditions improve, and new funds benefit from a limited period of closed-entry strategies, alleviating any sudden redemption pressures.

Regardless of whether investors choose new or established funds, it's not a question of better or worse; it reflects strategic choices tailored to distinct market environments

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