As the first-quarter 2026 reports of public funds concluded their disclosure period, the investment operations of various fund categories have become clear.
In the first quarter of this year, equity market volatility intensified, drawing market attention to the performance of flexible allocation funds, known for their adaptability. Overall, these funds exhibited significant performance divergence during the quarter, with several focusing on the AI (artificial intelligence) sector but achieving markedly different outcomes.
A chief economist and fund manager noted that flexible allocation funds can invest in both stocks and bonds, offering relatively flexible position settings and enabling diversified allocation across different industries and sectors.
The primary advantage of flexible allocation funds lies in their ability to dynamically adjust equity positions and industry allocations based on market changes. This allows them to increase exposure during favorable market conditions to enhance return potential and reduce positions during volatile periods to manage downside risk. Additionally, such funds are typically not restricted to specific sectors and can switch between different segments to better align with shifting market trends.
Wind data indicates that over 70% of flexible allocation funds currently stipulate in their contracts that equity asset allocations range from 0% to 95% of the fund’s assets. In the first quarter, some flexible allocation funds maintained low equity positions to mitigate the impact of market fluctuations. In terms of net value performance, these products experienced relatively minor volatility, whereas funds with significant net value gains or declines generally maintained higher equity exposures.
For example, Ping An Xin An Mixed and Oriental Alpha Select Mixed are both flexible allocation funds with significant AI sector investments. By the end of the first quarter, Ping An Xin An Mixed held an equity position of 82.69%, with its A-share unit achieving a net value growth rate of 20.78% during the quarter. In contrast, Oriental Alpha Select Mixed maintained a 90.25% equity exposure, but its A-share unit recorded a net value decline of 23.47% in the same period.
Industry experts unanimously agree that artificial intelligence is a key beneficiary of China’s economic transformation, offering clear long-term industry direction, strong policy support, and ongoing commercialization prospects. Investment opportunities exist across the entire AI industrial chain, making it a major allocation focus for flexible allocation funds.
Regarding the divergent performance among such funds, analysts cite three main reasons: differences in sub-sector allocations, variations in timing and positioning adjustments, and disparities in the ability to identify valuable individual stocks.
It is emphasized that flexible allocation funds place high demands on fund managers' professional capabilities, particularly in terms of mid-term market trend forecasting, sector comparison and rotation skills, and disciplined risk management. Managers must accurately time position adjustments, execute appropriate sector rotations, and guard against potential risks arising from style drift or excessive concentration.
In summary, flexible allocation funds not only require managers to precisely control positions, identify promising sectors, and select high-quality investments but also test their practical ability to make dynamic adjustments in response to market conditions.
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