In recent years, the financial landscape has witnessed a noticeable surge in exchange-traded funds (ETFs), particularly those focused on stock investmentsWith the rapid growth of stock-based ETFs becoming a focal point in public investment circles, it's imperative to delve into what has catalyzed their popularityAs of the end of 2024, the number of ETFs listed on domestic exchanges has reached an impressive 1,033, amassing a total asset value of approximately 3.7 trillion yuan, which signifies an extraordinary ascent of 81% from the previous yearThe stock ETFs alone have burgeoned to 2.89 trillion yuan, accounting for about 3% of the total market capitalization of A-shares in China.

The appeal of stock ETFs is manifold, showcasing remarkable advantages such as diversification and flexibility in tradingBy essentially mirroring the performance of the underlying indices, stock ETFs allow investors to capitalize on market movements with associated benefits of lower fees and heightened transparencyThis makes their acceptance among retail investors hardly surprisingWhen examining the details, we find that broad-based products within the stock ETF category have manifested the most significant growth, reflecting an unyielding pursuit of the underlying benefits these products offer.

Notably, the success of the broad-based ETFs is illustrated by the exemplary performance of the CSI A500 ETF last year, which consistently marked new highs in key indicators such as fund inflow and overall scale growth—contributing to an accelerated expansion of the ETF marketResearch from the Shanghai Securities Fund Evaluation Center suggested that broad-based ETFs accounted for over 80% of all net growth within the ETF market over the past year.

Furthermore, the HuShen 300 ETF has notably emerged as a primary conduit for significant capital inflows from central state-owned enterprises, suggesting a robust endorsement of broad-based ETFs and catalyzing further participation from private investors

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This phenomenon exemplifies a synergistic relationship where state-backed investment leads and invigorates private sector confidence, particularly in volatile market environments.

The prevailing market volatility has led many investors to prioritize stable returns—often referred to as "Beta." They tend to adopt a mindset of securing achievable returns rather than chasing lofty targets, mirroring a broader consumer trend towards rational and pragmatic decision-makingThis shift becomes apparent when analyzing the capital movements within stock ETFs post-Chinese New YearDuring this period, significant changes were observed, highlighting the adaptive strategies investors employ.

Between the end of the Spring Festival and February 20, 2025, two key trends in stock ETF investments surfacedFirstly, ETFs focused on technology themes, influenced heavily by AI and humanoid robotics, experienced a notable net outflowThis trend reflects investor behavior aiming to secure gains from previous upswings in tech stocks, indicating an acute awareness of market timing and profit-taking strategiesIn contrast, ETFs linked to broad indices like the CSI A500 and the HuShen 300 also saw a decrease in shares.

Secondly, however, there were ETFs whose share volumes surged prominently, and these were closely tied to the booming technology sectorPost-holiday trading results indicated that the ETFs with the most substantial share increases were heavily aligned with cutting-edge technologies such as innovative pharmaceuticals and AI software solutions.

The influx of capital in the technology sector denotes a clear delineation wherein broad-based ETFs remain resilient amidst fluctuating market fadsParticularly, technology trends such as AI have swayed investor sentiment, with broad-based ETFs reflecting a composed stance against ephemeral consumer interests.

Shifting gears to another aspect of investment strategy, the realm of public quantitative funds has shown emerging trends worth noting

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As the global financial scene evolves, one particular figure has sparked significant attentionLiang Wenfeng, a pioneer in quantitative investing and founder of the private equity firm DeepSeek, has made waves with his proprietary DeepSeek-R1 model, which has greatly influenced the AI industry globally.

Before achieving worldwide recognition, Liang had already established a strong legacy in quantitative investing leveraging artificial intelligence technologiesHis firm, known as Huanfang Quantitative, showcased remarkable growth from 30 billion yuan in assets under management in 2019 to an impressive milestone of over 100 billion yuan by 2021.

Presently, China's quantitative investment scene is predominantly led by private quantitative funds similar to Huanfang QuantitativeAs recorded by Citic Securities, the aggregate size of private equity quantitative funds reached approximately 837 billion yuan by the end of 2024. Comparatively, public quantitative funds totaled about 300 billion yuan, with the number of these funds amounting to 610.

The stark contrast in strategy and entry barriers between private and public quantitative funds highlights the latter's clear advantage in terms of transparency and accessibilityEven with a considerable gap in their respective sizes, this disparity may indicate significant potential for growth within public quantitative funds.

Delving deeper into the varieties of public quantitative funds reveals that index-enhanced products lead in both quantity and size, boasting 295 funds with an aggregate scale of 212.76 billion yuan, while actively managed quantitative products follow with 292 funds totaling 83.15 billion yuan.

Within the index-enhanced category, wide index products dominate, constituting 264 offerings with an impressive scale of 196.19 billion yuan in 2024.

This pattern underscores a broader trend where public quantitative funds predominantly center on enhancing wide indices

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Such a preference may stem from investors prioritizing Beta over other strategies, thus dictating market demand dynamicsIt's worth noting that wide index-enhanced products performed considerably better last year compared to sector-specific and stylistic strategies, achieving an average excess return of 2.29% against 1.16% and 0.73% for their respective counterparts.

Particularly, products linked to the Guozheng 2000 and Zhongzheng 1000 indices displayed exceptional excess return metrics, averaging at 5.71% and 5.41%, respectively, showcasing a clear competitive edge over other indices.

It’s important to recognize that the study focuses largely on excess returns rather than straightforward fund yield, calculated as the fund yield minus the index yield—a crucial distinction for investors to considerFor example, the HuShen 300 index yielded 14.68% last year, compounded with an average excess return of 0.82%, bringing the average yield of its enhancement product to 15.50%. Conversely, the Zhongzheng 1000 index enhancement yielded an average of only 6.61% using the same calculation method.

Additionally, in the realm of actively managed quantitative funds, the average return for 2024 was reported at 5.18%, with 73.3% of these products yielding positive returnsIn comparison to actively managed equity funds, the active quantitative sector outperformed by 3.45%, although the margin was less pronouncedDistinctively, the highest average returns were documented within stylistic active quantitative funds.

In light of the rise of AI, particularly the newfound capabilities associated with models like DeepSeek-R1, it's evident that several public quantitative funds are on the cusp of integrating generative AI methodologies into their investment frameworks

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