The public fund industry has experienced steady growth in recent years; however, the proliferation of homogeneous products has raised concerns about the need for improvement in the quality of development within the sectorDespite this sameness, the industry has also witnessed a surge in product innovation, prompting a reevaluation of strategy and approach.

Over the past year, the public fund sector has invested significantly in developing new productsVarious innovative index funds have emerged, alongside a robust issuance of dividend-themed productsAdditionally, the Qualified Domestic Institutional Investor (QDII) fund category has expanded, and public Real Estate Investment Trusts (REITs) have reached new heights in scale.

The launch of new funds in 2024 has exceeded 1,100, with total issuance surpassing 1.1 trillion yuanThis marks the sixth consecutive year of launching over a thousand new funds, alongside breaking the trillion-yuan barrier in issuance scale

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Key trends have emerged from the industry's push for growth.

Firstly, the emphasis on innovative index products has intensifiedWhen new broad-based indices emerge, fund companies—both leading and mid-sized—flock to take part, aiming to carve out a segment of this lucrative marketFor instance, the CSI A500 index has garnered particular attention, with 54 related funds created in 2024 alone, totaling over 140 billion yuan in issuance scale.

Notably, both the initial batch of ten and the subsequent twelve CSI A500 Exchange-Traded Funds (ETFs) each hit the maximum fundraising limit of 2 billion yuanFurthermore, products tied to the CSI A50 index have demonstrated similar enthusiasm, with 24 funds launched last year, accumulating over 250 billion yuan in issuance.

Secondly, there has been a concentrated effort to satisfy investor demand for stable returns, leading to a flood of dividend-themed products

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In 2024, more than 90 dividend-themed products were established, with several exceeding 1 billion yuan even amid a sluggish market for actively managed equity fundsIndustry professionals recognize that these thematic funds align with investors' preferences for steady returns, bolstered by supportive policies.

Thirdly, the global investment perspective is driving the expansion of QDII funds into new territoriesIn 2024, the Huatai-PineBridge and Southern Asset Management launched Saudi Arabian ETFs, marking a milestone as the first domestic funds to invest in the Saudi marketConcurrently, a wave of ETF-linked products has come to market, providing off-site investors with additional toolsFor instance, the Huaan France CAC40 ETF and Nikkei 225 ETF linked funds were introduced last year.

Fourthly, public REITs have made leaps in both numbers and scale, reaching historical peaks in issuance

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The past year saw these funds enter a phase of normalized issuance, with increasing market activity and investor interestThe diversity of underlying asset structures is on the rise, with several new first-of-their-kind products launched, impacting areas like consumer infrastructure, transportation, logistics, energy, affordable housing, and water conservancy.

As we enter 2025, the production of public products is accelerating furtherData from Choice indicates that by January 20, 2025, 51 new funds have been established with nearly 40 billion yuan in issuanceAn additional 54 funds are currently being marketed, with several already having announced their share issuance.

Beyond just launching new funds, management firms are actively proposing new productsReports show that dozens of fund managers have submitted over 90 new fund offerings this year aloneThe focus remains on innovative index products, particularly in the bond index category.

As of December 31, 2024, the first batch of eight benchmark credit bond ETFs received approval and commenced issuance on January 7, 2025, each with a maximum fundraising target of 3 billion yuan

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The early issuance results are promising, with total fundraising nearing 22 billion yuan; many of these ETFs introduced a proportionate allocation mechanism for their offerings, marking a significant milestone in the history of bond ETFs.

The enthusiasm for equity index products is similarly strongOn January 8, the Shanghai Stock Exchange and the China Securities Index Company announced plans to release the SSE Star Market Composite Index and its price index on January 20. On January 13, twelve fund companies—including Southern Fund, Bosera, and E Fund—submitted applications for ETFs related to the Star Market Composite index.

Progress continues with incorporating indices related to the CSI A500 index, with five funds established this year and seven additional ones in the issuance phaseFurthermore, an enhanced index fund has already announced its share issuance, with several other enhancements from firms actively submitted for approval.

The public fund industry is still embracing globalization

Recently, the CCB Li An Emerging Asia Selected ETF was established, with a maximum issuance scale of 1 billion yuan, which received wide acclaim in the market, selling out on its first dayThis ETF is linked to a Hong Kong-Shanghai "through train" trading mechanism, investing in an overseas counterpart, the Li An CCB Emerging Asia Selected Index ETF, which tracks the Singapore Exchange's Emerging Asia Selected 50 IndexThere are also expectations for significant expansion within the mutual recognition fund framework, as Morgan Asset Management submits multiple products this year, including the Morgan Global Income Fund and Morgan ASEAN Fund.

Nevertheless, a reshuffling of products is quietly taking place within the fund industryThe removal of funds is indicative of investors voting with their feet; nearly 300 funds were closed last year, and in less than a month into the new year, 14 funds have already announced liquidation

The primary reason for this has been poor performance and inadequate fundraising scale.

Industry insiders perceive fund closures as a necessary culling process, especially amidst the current over-crowded market filled with over 12,300 funds, often plagued by homogenizationThis reality calls for fund managers to exercise restraint and adopt more prudent strategies—designed to genuinely meet investor needs through the launch of competitive products.

Looking ahead, which areas should public funds prioritize? Experts believe that absolute return products present a significant growth opportunity, with substantial demand from investorsAccording to an analyst from Cinda Securities, the risk-return landscape of public funds reflects a polarized trendHigh-risk, high-volatility equity funds can yield considerable returns but carry the risk of significant net asset value fluctuations, leading to inconsistent returns in different market environments

Conversely, low-risk fixed-income funds offer stable, albeit lower, yields.

“What is lacking between these two categories of funds is a product that offers relatively higher returns but lower volatility—ideal for those seeking sound returns,” the analyst points outSuch funds typically employ multi-asset strategies and risk-hedging tactics to provide targeted returns while controlling loss exposure.

In addition to creating absolute return products, experts indicate the necessity for funds to enhance their ability to generate these returns“Public funds need to leverage traditional areas of expertise in equities and bonds while expanding their investment capabilities to include commodities, foreign equities, overseas bonds, REITs, currencies, and derivatives,” as articulated by the chairman of Bosera FundA multifaceted asset allocation framework can help improve returns for absolute return-oriented equity and fixed-income investments.

Despite the fiercely competitive landscape within index funds, it remains a largely untapped territory