Fund Half-Year Exam: Who won?

The first half of 2024 has come to a close, how have public mutual funds performed? Data from Wind (a financial data and software company) shows that in the secondary investment classification, commodity funds and QDII (Qualified Domestic Institutional Investors) funds invested overseas have maintained a leading position, bond funds have also achieved decent returns, while domestic actively managed equity funds have overall posted negative returns.

From the table above, it can be seen that commodity funds led the way in the first half of the year with an average return of 11%; followed by QDII funds, with average returns ranging from 4% to 6%; then bond funds, with average returns between 2% and 3%; domestic actively managed equity funds have posted an overall negative average return, with an average decline of 5%; the worst performing on average were equity FOFs (Fund of Funds), with 14 equity FOFs seeing an average drop of over 7%.

Nasdaq Technology Funds Lead the Rise

Among commodity funds, gold-themed funds were the main force, with an average return of 13%. In addition, the only silver-themed fund in the entire market - China International Fund's Silver Futures Fund led with a 23% increase.

In QDII funds, the Nasdaq 100 Index rose by 16% in the first half of the year, and funds tracking the Nasdaq Index also recorded similar returns. The most outstanding performer was the Jing Shun Great Wall Nasdaq Technology Market Value Weighted ETF (hereinafter referred to as "Jing Shun Nasdaq Tech ETF"), which has risen by 33% since the beginning of the year.

Further analysis reveals that the impressive returns of this fund come from the purification of the technology component stocks of the Nasdaq Index. The fund focuses on the technology sector within the Nasdaq 100 Index and is distributed using a market value weighting method, with the top three weighted stocks being: Nvidia, with a weight of 14%; Microsoft, with a weight of 13%; and Apple, with a weight of 12%. Among them, Nvidia's stock price has risen by 150% since the beginning of the year.

Public data shows that there is currently only one ETF in China that specifically targets the technology sector of the Nasdaq. Jing Shun Great Wall has also used this product to catch up and surpass others, with the product's scale expanding from less than 500 million yuan to the latest 8.7 billion yuan in just one year.

Chen Wenyu, Deputy General Manager of Jing Shun Great Wall, told Caijing (a financial magazine) that the technology sector and the non-technology sector actually have completely different investment logics. If they can be purified or upgraded separately, it can provide investors with a more pure Beta investment tool. "The homogenization of ETF products is quite serious. When the fee rates and tracking errors are not significantly different, we as latecomers do not have a strong competitive advantage. Therefore, we decided to focus on product development, hoping to create features and differences in the same or similar tracks."In addition to the Invesco QQQ Trust ETF, other QDII funds that have also benefited from the AI (Artificial Intelligence) industry trend and achieved impressive performance include the CCB Principal Emerging Market Selection, among others.

In the category of actively managed equity funds, artificial intelligence and high dividends have become the main sources of returns. Several funds managed by Wang Peng, the fund manager of Manulife Fund, have made the list, with the Manulife Jingqi Navigation Two-Year Hold achieving a return of over 30% since the beginning of the year. Xu Tuo, the fund manager of Yongying Fund, has seen a semi-annual return of 28% with the Yongying Dividend Optimal Selection A. Wang Peng's investment philosophy is "investing in leading industries with favorable prospects, pursuing a double play of Davis," and the main source of returns in the first half of the year came from a heavy position in the AI sector. He believes that this year's investment opportunities in the market lie in the following industries: first, the generative AI industry. The booming development continues to bring investment opportunities in computing power, and leading companies have entered a stage of continuously exceeding performance expectations, which will improve the investment experience, while investment opportunities in applications still need to be observed; second, industries benefiting from the import substitution of "bottleneck" links. After experiencing a correction, investment opportunities are beginning to re-emerge; third, industries in China that are more in demand domestically during the high-quality development stage, as well as investment opportunities for the industry going global in the medium to long term. In addition, the investment value of high dividends will continue during the phase of declining interest rates.

Another main line of returns in the first half of the year was high dividends. Xu Tuo believes that stability is the underlying color of the current economic and social development, and corporate management goals have already taken the lead in transformation. The return target for equity investment also needs to be transformed as soon as possible, which means not only reasonably lowering the expected return target but also increasing the patience to achieve this return.

70 funds have seen a decline of more than 30%.

Compared to the diversified investment directions of the top-performing funds in the first half of the year, the investment directions of the poorly performing funds are concentrated in small-cap stocks.

In 2023, the successful application of the micro-cap stock strategy by Golden Yuan Shun'an Yuanqi made it an internet celebrity fund. However, the subsequent issuance of Golden Yuan Shun'an Industry Selection by the same company has become the bottom fund of the year, with the micro-cap stock strategy suffering a heavy blow during the first quarter. The fund has only been established for seven months and has already incurred a loss of 38.58%.

The second-to-last fund, Tongtai Kaitai, failed with stocks on the Beijing Stock Exchange. Its fund manager, Wang Xiu, stated in the first-quarter report that there are many specialized and innovative companies on the Beijing Stock Exchange, many of which are leaders in their respective niches and have good future growth prospects. After the correction, the cost-performance ratio is higher, and they have greater investment value. After the fund fell by 26% in the first quarter, it continued to decline by 15% in the second quarter. Before the change of fund manager at the beginning of this year, the fund mainly rotated in growth fields such as photovoltaics, chips, and pharmaceuticals. It fell by 28% in 2023 and by 31% in 2022.Taixin Modern Service Industry Fund heavily invested in upstream new energy companies in the first quarter. The fund fell by 21% in the first quarter, significantly underperforming the performance benchmark (+3%). However, its fund manager, Huang Qianyi, stated in the quarterly report that the fund appropriately avoided systemic risks, maintained a high position operation after the risks were resolved, and structurally allocated to defensive sectors on a phased basis, but overall maintained the allocation of industries and companies with relatively undervalued valuations and fundamentals that are expected to bottom out.

The overall returns of actively managed equity funds were negative, against the backdrop of the overall weakness of the stock market in the first half of the year. After several interventions by the "national team" to support the market, the Shanghai Composite Index still fluctuated around 3000 points.

Xu Tuo told Caijing that the core reasons include both the market's lack of confidence in the stabilization of the domestic macroeconomy and a pessimistic view of the profitability of listed companies, as well as the high U.S. Treasury bond rates suppressing the valuation of Chinese assets. From the results, some companies with high valuations, lacking performance support, and poor quality saw significant declines, and some problematic companies were even delisted; while high-quality companies with low valuations showed a certain return on value, companies with obvious competitive advantages, standardized corporate operations but average short-term prosperity also showed a certain resistance to the downturn.

Xu Tuo believes that this change is essentially the capital market actively and passively correcting its biases, continuously correcting the past focus on short-term prosperity and so-called investment logic, while neglecting the certainty, stability, and continuity of enterprises creating returns for shareholders in the medium and long term, shifting from trading assets with high uncertainty to gain capital gains, to holding assets with relatively higher certainty to obtain reasonable returns. The regulatory authorities place greater emphasis on investor-centric approaches, using a variety of measures, including increasing the crackdown on illegal and irregular behavior, actively guiding enterprises to increase dividends and buybacks, and restraining financing impulses, as well as introducing long-term and stable funds to smooth market fluctuations. "These changes are clearly beneficial to the long-term healthy development of the capital market, in line with the requirements of high-quality development."