Market volatility surges, "fixed income plus" faces major redemption test!

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【Introduction】In the face of market volatility, “Fixed Income Plus” funds face significant redemption tests. Fund managers are actively optimizing allocations and strategies.

By China Fund News reporters Fang Li and Lu Huijing

Over the past year, the thriving “Fixed Income Plus” market has been disturbed by market fluctuations.

According to China Fund News, the equity market performed strongly at the start of this year, with many “Fixed Income Plus” funds attracting significant inflows, creating several new products worth hundreds of billions of yuan. However, recent increased market volatility has led some sensitive institutional investors to take profits, redeem “Fixed Income Plus” funds, and temporarily step back to observe.

In this environment of heightened volatility, “Fixed Income Plus” fund managers are adjusting their strategies around asset allocation, risk control, and refined tactics, aiming to improve investors’ experience by balancing returns and volatility.

Market Fluctuations Intensify

“Fixed Income Plus” Funds Face Redemption Challenges

Since the beginning of the year, “Fixed Income Plus” funds have become a market hotspot, with many fund companies seeing significant growth in related products.

A senior executive from a large fund company revealed that “Fixed Income Plus” products have gained considerable attention in recent years, with several of their funds surpassing 100 billion yuan in size. The incremental capital mainly comes from institutional investors.

Another industry insider noted that current market funds have a strong overall demand for “Fixed Income Plus” products. Many of their funds are growing rapidly, with some reaching the 100-billion-yuan mark. The funding sources include both retail individual investors and institutional allocations, especially from internet platforms, where demand for moderate-risk, steady-return “Fixed Income Plus” products continues to rise.

Additionally, industry analysts summarized that since the beginning of the year, the growth of “Fixed Income Plus” funds has shown a pattern of “new product launches increasing in size and existing products continuing to attract inflows,” with both the entire industry and high-performing individual funds experiencing notable scale breakthroughs. Top fund companies’ products perform particularly well, demonstrating strong multi-asset allocation capabilities and deep research into product strategies and capital needs.

However, recent international geopolitical tensions, increased equity market turbulence, and valuation adjustments in convertible bonds have caused some shifts in fund inflows and outflows.

According to Tian Yue, senior strategist at China Merchants Fund, last year’s inflows into “Fixed Income Plus” funds were driven by market trends. As we move into 2026, the logic may shift toward “allocation-driven” inflows. Although low interest rates still motivate capital pursuit of yields, short-term market volatility may cause investors to worry about net value declines, leading some high-equity, high-volatility “Fixed Income Plus” products to experience phased outflows.

Another industry insider pointed out recent significant changes in fund flows. “Because convertible bond valuations were at historic highs earlier, their relative value compared to stocks weakened, and institutional concerns about future stock market volatility led to reduced allocations or redemptions of high-risk ‘Fixed Income Plus’ funds. In contrast, retail investors have shown persistent enthusiasm for purchasing. Despite short-term market fluctuations disrupting fund flows, the long-term trend of asset migration among residents suggests individual investors remain a key support for steady growth in ‘Fixed Income Plus’ scale this year.”

“Fund fluctuations mainly stem from highly sensitive institutional capital, especially banks and insurance funds. Due to their low risk tolerance for losses, their concentrated redemption and subscription behaviors often cause large fund inflows and outflows. In contrast, retail funds are more broadly distributed, following the law of large numbers, and generally perform steadily and continuously,” another fund industry insider said.

Some industry experts also noted that recent fund flow movements are positively correlated with “Fixed Income Plus” yields. Funds with stable performance and good drawdown control tend to have stable redemption and subscription activity, while more volatile products are prone to redemptions during net value declines.

Three Core Drivers Resonating

Decoding the Underlying Logic of “Fixed Income Plus” Scale Explosion

Despite short-term redemption disturbances, over the past one or two years, the overall scale of “Fixed Income Plus” funds has continued to expand. The rapid growth behind this trend results from a macro environment, capital demand, and market supply resonating together.

BoShi Fund manager Gao Hui, specializing in convertible bond ETFs, said that this year’s rapid growth in “Fixed Income Plus” fund size is primarily driven by reallocation needs of retail and institutional capital. In the context of declining deposit rates and large amounts of fixed-term deposits maturing, traditional low-risk financial products have become less attractive. “Fixed Income Plus,” with its positioning of ‘bond floor with equity enhancement,’ has become a preferred choice for stable capital, with retail investors being a significant new source of growth.

Second, the market environment and supply-side factors further amplify growth momentum. Both equity and bond markets present structural opportunities. Bonds offer low-volatility coupon buffers, while equities and convertible bonds can provide upside potential. Most products have experienced relatively low historical volatility. Coupled with regulatory encouragement for issuing mid- to low-volatility, equity-including products, and strong distribution channels via banks and internet platforms, product strategies continue to optimize. This has helped “Fixed Income Plus” gradually shift from institutional allocations to mainstream retail investment, enabling rapid scale expansion.

HaiFuTong Fund’s mixed-asset investment manager Yu Xingwei summarized: this year’s rapid growth in “Fixed Income Plus” funds is mainly driven by three factors: first, the overall downward trend in interest rates reduces the value proposition of pure debt assets; second, the necessity of equity asset allocation increases; third, residents’ investment concepts are maturing, shifting from “timing” to “asset allocation.”

Similarly, Jiashi Fund believes that the rapid expansion of “Fixed Income Plus” products results from the macro environment, market structure evolution, and investor demand upgrades resonating together, marking China’s public fund industry entering a “precision era” of multi-asset allocation.

Regarding recent redemption disturbances caused by market fluctuations, many believe that current redemption behaviors are driven by the pursuit of better investment opportunities rather than a negative view of “Fixed Income Plus” strategies.

“Recently, institutional fund outflows are more about systematic asset rebalancing rather than short-term profit-taking from price swings. The trend in equity markets remains unchanged, and this rebalancing is a normal long-term asset allocation adjustment reflecting changing expectations for different asset classes,” said a fund industry insider.

Additionally, fund flow volatility mainly stems from highly sensitive institutional capital, especially banks and insurance funds. Retail funds are more broadly distributed, more in line with the law of large numbers, and generally perform steadily. Outflows also show differentiation: stable, well-controlled “Fixed Income Plus” products tend to have positive correlations between fund flows and returns, while more volatile products are prone to redemptions during net value declines.

Active Adaptation in Volatile Markets

Fund Managers Optimize Multi-Dimensional Portfolio Strategies

In response to market turbulence and redemption fluctuations, fund managers are quickly adjusting their operational approaches, prioritizing “strict risk control, balanced risk, and optimized holding experience.” They are refining asset structures, position management, and risk controls to actively meet market challenges.

Yu Xingwei emphasized that in a volatile environment with rapid style rotations, strategies based on chasing gains or cutting losses often fail. Instead, investment research frameworks, trading discipline, and patience are crucial. The core of “Fixed Income Plus” is maintaining product positioning and consistency. His approach involves a “dividend-based core + structural trading” dual-layer framework: on one hand, sticking to high-quality dividend assets as the base; on the other, using quantitative models combined with industry trend analysis to seize structural opportunities and trading hotspots.

Gao Hui also stated that in a volatile market, the main goal of adjusting “Fixed Income Plus” allocations is to strictly control drawdowns and pursue absolute returns. Specific measures include reducing risk exposure, strengthening defense by lowering equity positions and increasing allocations to high-dividend, low-volatility defensive sectors. For convertible bonds, focus on selecting those with strong bond characteristics, lower absolute prices, and lower premium rates. Additionally, optimize internal structures through diversification and enforce strict trading discipline to avoid tail risks.

Xing Changjia, investment manager at Debang Fund, approaches from pre-assessment and real-time response: first, quantifying the volatility characteristics of various underlying assets under normal market conditions and strictly aligning their weights with debt and return/drawdown requirements; second, implementing differentiated responses during execution—if within normal fluctuation ranges, avoid overreacting and maintain strategic steadiness; for irrational, unexpected volatility, view it as a good opportunity for contrarian positioning. The key is to see through phenomena to the underlying macro direction and adjust positions dynamically to generate excess returns.