Under the Multi-Diversified Investment Wave, Public Fund Allocation Enters a New Stage

Recently, A-shares have experienced some adjustments. Coupled with the low-interest-rate environment and rising demand for conservative investments among residents, the wave of diversified public fund allocation has emerged. As core vehicles, FOFs and fund advisory teams are evolving from traditional stock and bond pairing to multi-asset, multi-region, and multi-category global allocation, becoming an important tool for capital seeking stable returns.

From channel efforts to attract wealth management funds, to deep empowerment of investment decisions through quantitative tools, and to personalized customization in advisory services, diversified allocation is breaking traditional investment boundaries and accelerating the public fund industry’s shift toward high-quality development characterized by “strong allocation and enhanced experience.”

The momentum of diversified allocation is gaining strength

Public funds’ diversified asset allocation is becoming a key choice for capital. More and more ordinary investors are shifting from single-asset investments to diversified allocation, injecting substantial incremental funds into the public fund sector.

According to Tianxiang Investment Advisory data, by the end of 2025, the scale of FOFs will surpass 200 billion yuan, a 66% increase from the end of 2024. As of March 16, about 20 FOF products with initial raises over 1 billion yuan have been launched this year, indicating that multi-asset allocation has become a new market trend. Several managers of multi-asset fund advisory portfolios also revealed that their managed products have steadily grown since inception, and during significant market fluctuations, the number of investors willing to redeem has not increased.

The complex and volatile market environment is precisely the “battlefield” where the advantages of diversified allocation strategies are demonstrated. Zou Zhuoyu, Director of Quantitative Investment Research at Yingmi Fund Research Institute, stated that increased global market volatility does not necessarily drag down the performance of related portfolios and may even highlight the risk diversification benefits of multi-asset allocation.

For example, the China Europe Wealth Multi-Asset Advisory Portfolio: in January this year, as global risk appetite improved, it allocated to technology growth assets; when the volatility of non-ferrous metals expanded temporarily, it increased allocations to chemicals and other resource commodities. In February, with the tightening of short-term liquidity, metal resources entered a correction phase, so the portfolio used medium-term bonds for hedging, reduced overseas stock positions, increased holdings of A-shares, H-shares, and dividend assets, and optimized commodity asset allocation.

Ms. Chen, with nearly ten years of investment experience, said, “Buying ETFs last year could still make a good profit, but it’s clearly harder this year.” After experiencing market gains previously, she now prefers to “preserve her gains.” This year, she has moved some funds out of ETFs and is considering investing in multi-asset FOFs or fund advisory portfolios.

Public funds embrace industry new trends

Embracing diversified allocation is becoming a new trend in the public fund industry. This is not only driven by market volatility but also a natural result of industry evolution and upgrading.

“Recently, ‘phenomenal’ FOF products have appeared frequently, thanks to collaboration with leading bank channels,” said Yan Lu, Head of FOF Investment at Huafu Fund. He explained that currently, it is difficult for funds to find high-yield, guaranteed products, so investors tend to prefer relatively higher-risk, stable-yield assets. In recent years, the concept of multi-asset allocation in FOFs has been increasingly recognized by institutions and individual investors, making their sales naturally popular.

From an investment iteration perspective, multi-asset allocation aligns with the industry’s evolution. Yan Lu said that, for example, FOFs have entered phase 3.0: “Phase 1.0 FOFs focused on selecting funds, mainly marketed as ‘fund selection experts’; in phase 2.0, the industry shifted toward broad asset allocation, balancing fund selection with stock and bond asset allocation; now, in phase 3.0, the focus has further upgraded to comprehensive, multi-region, multi-category large-asset allocation, utilizing systematic and quantitative models to implement asset allocation strategies effectively.”

“Multi-asset allocation may become the mainstream for future FOF investments,” Yan Lu said. Currently, many FOFs focus on the ‘fixed income plus’ track. If an FOF does not include assets like QDII products or commodities, its advantages over ‘fixed income plus’ funds will be significantly weakened. To leverage its unique strengths, an FOF must maximize its advantages and actively pursue multi-asset allocation.

Supporting high-quality industry development

The “Action Plan for Promoting the High-Quality Development of Public Funds” issued by the China Securities Regulatory Commission in 2025 emphasizes shifting from a focus on scale to a focus on investor returns. The rise of diversified allocation aligns with this “enhanced experience” industry trend.

In this context, the deep empowerment of quantitative tools has become an accelerator for the development of public fund diversification. Yan Lu stated that for public FOFs to become sustainable and long-term investment products, they must establish a scientific and standardized investment system, overcoming human weaknesses as much as possible. Strengthening discipline and scientific rigor in investment can reduce randomness in outcomes and prevent over-reliance on single assets or fund managers.

“Looking at mature overseas markets, there are many such cases, like Bridgewater’s All Weather strategy. It mainly invests in U.S. assets, allocating stocks, bonds, and commodities based on a replicable investment framework. Even with personnel changes, this framework is likely to continue,” he said. Today, an increasing number of domestic FOF research teams also have backgrounds in mathematics, quantitative analysis, and asset allocation.

Customized services further expand the space for diversified allocation. Zou Zhuoyu introduced that Yingmi Fund’s “Remainder” platform launched customized solutions in June 2024, providing tailored advisory strategies through broad asset allocation to meet investor needs, achieving “personalized” services.

“Customized multi-asset allocation for high-net-worth clients, originally limited to offline scenarios, is expected to benefit a broader user base through online services,” Zou Zhuoyu said. Compared to single products, customized allocation can better match client needs. However, to truly excel in customized multi-asset allocation, risk control and improving client experience are key, relying on quantitative risk management and dynamic adjustment strategies to precisely match different client groups’ return goals and risk tolerance.

Some industry insiders believe that domestic multi-asset investment is still in its early stages: “Many funds and advisory portfolios labeled as ‘multi-asset allocation’ are actually just using gold, overseas funds, etc., as ‘decorations,’ not true diversification. The key to multi-asset allocation is not simply including various assets but understanding and dynamically optimizing the correlations and hedging relationships among assets. Only by deeply understanding the underlying logic and managing correlations can the allocation of gold, QDII, and other assets be effectively increased, truly achieving diversified returns and risk reduction.”

Facing the development opportunities of public fund diversification, industry experts believe that only by leveraging professional capabilities to seize the era’s opportunities and maintaining long-term performance to earn investor trust can multi-asset allocation truly serve residents’ wealth growth and become an important driver for public funds to practice inclusive finance and pursue high-quality development.

(Edited by: Xu Nannan)