As national advancement, economic transformation, and technological self-reliance increasingly dominate the narrative, a growing number of investors are shifting their focus toward smaller companies. The CSI 1000 Index, widely regarded as a cradle for small-cap growth stocks, continues to see its strategic allocation value rise.
Index-enhanced funds that track the CSI 1000 while striving for excess returns are also expanding in number. According to periodic reports, by the end of 2025, the number of holders of the ICBC Credit Suisse CSI 1000 Index Enhanced Securities Investment Fund (referred to as ICBC CSI 1000 Index Enhanced, Class A: 016942, Class C: 016943) had increased more than threefold compared to the end of 2024, with a one-year growth rate of 357.57%. Individual investors accounted for over 99% of the fund's shareholdings.
Although recent geopolitical tensions overseas have heightened risk aversion and tightened market liquidity—putting pressure on the more liquidity-sensitive CSI 1000 Index—industry experts believe that short-term corrections may pave the way for healthier market performance in the future. Over the medium to long term, the core investment rationale favoring small-cap stocks remains intact. This period of adjustment may present an opportunity for investors seeking convenient exposure to small and mid-cap growth trends.
**Embracing Innovation: Small Caps Have Their Moment**
While large-cap blue chips offer stability, small and mid-cap stocks represent an indispensable and dynamic segment of the market. This sector aligns closely with policy direction and industrial development trends, showcasing strong innovation capacity and growth potential.
Historical patterns in the A-share market reveal alternating cycles of large-cap and small-cap dominance. Particularly between 2022 and 2024, market sentiment gradually shifted from "core assets" to "small-cap growth," with a pronounced small-cap bias emerging since the "September 24 rally" in 2024. Wind data shows that from September 24, 2024, to April 8, 2026, the CSI 1000 Index rose by 78.02%, outperforming the CSI 800 Index and the Shanghai Composite Index, which gained 51.32% and 45.33%, respectively. This outperformance stems largely from the growing emphasis on industrial upgrading and technological innovation, combined with a favorable liquidity environment and renewed market activity. Companies in high-tech sectors, especially small and mid-cap firms specializing in niche fields, have garnered higher risk premiums.
Despite recent volatility and corrections in small-cap stocks, leading some investors to question the sustainability of the trend, macroeconomic trends and industrial upgrade cycles—key drivers of style rotation in A-shares—suggest that small-cap growth may continue to offer attractive prospects.
Macroeconomic policies remain supportive. The People's Bank of China's monetary policy committee, in its first-quarter meeting of 2026, acknowledged deepening external uncertainties but reaffirmed its commitment to moderately accommodative policies and enhanced counter-cyclical and cross-cyclical adjustments. China Galaxy Securities anticipates that structural monetary tools will continue to channel financial resources toward key areas such as technological innovation, small and micro enterprises, and domestic demand expansion. Over the long run, expectations of continued policy support may boost risk appetite, directing capital toward high-growth, high-volatility small-cap stocks.
From an industrial perspective, accelerating high-level technological self-reliance and fostering new productive forces represent strategic priorities for China during the 15th Five-Year Plan period and beyond. The plan emphasizes the development of next-generation IT, new energy, advanced materials, intelligent connected vehicles, robotics, biopharmaceuticals, high-end equipment, aerospace, and other emerging industries. It also highlights future sectors such as quantum technology, bio-manufacturing, hydrogen and nuclear fusion energy, brain-computer interfaces, embodied AI, and 6G communication. These policy-backed areas are poised for significant growth, potentially giving rise to tomorrow's market leaders.
In capital markets, government bodies at various levels have increasingly prioritized support for small and medium-sized enterprises, introducing measures to assist with financing, technological innovation, and digital transformation. As a new wave of technological revolution and industrial transformation accelerates, many under-the-radar small and mid-cap stocks may seize opportunities to grow rapidly. These "hidden champions" often exhibit greater flexibility, enabling swift adaptation to market changes and potential improvements in both valuation and earnings.
**CSI 1000: A Hub for Specialized Innovators**
As a benchmark for small-cap growth stocks, the CSI 1000 Index includes 1,000 securities excluded from the CSI 800 Index (which comprises the CSI 300 and CSI 500), selected based on smaller size and sound liquidity. It reflects the performance of small-cap companies in the A-share market, complementing indices like the CSI 300 and CSI 500. The index is characterized by its distinct small-cap style, high concentration of specialized innovative firms, and elevated volatility.
In terms of market capitalization distribution, the CSI 1000 exhibits clear small-cap traits, focusing primarily on small and mid-sized companies. As of April 8, 2026, the median total market cap of its constituents was approximately RMB 13.4 billion, with an average of around RMB 15.8 billion. Over 80% of the index's weight comes from stocks with a total market cap below RMB 20 billion. In terms of free-float market cap, 291 stocks had a free-float cap under RMB 5 billion, 467 fell between RMB 5-10 billion, and 758—over 70%—had a free-float cap below RMB 10 billion, underscoring the index's small-cap bias.
Sector-wise, the index covers 31 primary Shenwan industries and displays strong innovative and growth attributes. As of April 8, 2026, the top five sectors were electronics, power equipment, pharmaceuticals, computers, and machinery, with weights of 14.48%, 10.01%, 9.14%, 7.58%, and 7.26%, respectively. Other sectors such as non-ferrous metals (6.78%) and basic chemicals (5.67%) also contributed significantly, indicating a tilt toward manufacturing, technology, and cyclical industries while maintaining overall diversification. According to Wind, as of the end of March 2026, 383 index constituents—nearly 40%—were classified as specialized innovative SMEs, with over 20% qualifying as "little giant" firms. Additionally, data from China Securities Index Co. shows that, as of April 8, 2026, the CSI 1000 had low concentration risk, with its top ten holdings accounting for less than 5% of the index, reducing the impact of individual stock performance on the index's long-term returns.
**Top Ten Constituents of the CSI 1000 Index**
Due to its small-cap orientation, the CSI 1000 Index tends to be more sensitive to improvements in earnings, capital inflows, and shifts in market sentiment. During bullish phases characterized by rising risk appetite, the index has historically demonstrated high elasticity. Wind data indicates that in the broad rally of 2014-2015 and the structural bull market of 2019-2021, the CSI 1000 significantly outperformed core broad-market indices like the CSI 800 and the Shanghai Composite.
Over the long term, the CSI 1000 has also shown greater dynamism and growth. From its base date of December 31, 2004, to April 8, 2026, the index recorded a cumulative gain of 695.58%, compared to 417.04% for the CSI 800 and 213.65% for the Shanghai Composite. However, high returns come with high risk: the index's annualized volatility since inception is nearly 30%, versus 25.37% for the CSI 800 and 23.26% for the Shanghai Composite. Investors interested in small-cap opportunities are advised to adopt a long-term perspective, considering gradual accumulation through CSI 1000-linked funds during market dips to improve the investment experience.
**Quantitative Enhancement Strategies: Pursuing Outperformance**
Among various products linked to the CSI 1000, those employing enhanced index strategies may hold particular appeal. The index's high volatility, broad constituent coverage, low concentration, and relatively low market efficiency offer ample room for alpha generation through active management and quantitative models.
With this in mind, the Index and Quantitative Investment Department at ICBC Credit Suisse adheres to an investment philosophy centered on "multi-factor, multi-model, and multi-strategy collaboration to generate excess returns." By combining low-correlation factors, models, and strategies, the team aims to diversify return sources and capture differentiated alpha, striving for consistent outperformance. Several enhanced index products launched by ICBC Credit Suisse have demonstrated the effectiveness of this approach through their historical excess returns.
The ICBC CSI 1000 Index Enhanced fund employs a dual strategy: passive indexing to track the underlying index and quantitative models to seek outperformance. According to custodian bank data, as of the end of March 2026, the fund's Class A share recorded a cumulative net value growth rate of 45.67% since its inception on March 28, 2023, compared to a benchmark return of 10.64%, resulting in an excess return of 35.03%. The fund's 2025 annual report further noted that during a year favorable to small caps, it achieved a net value growth rate of 49.18%, surpassing its benchmark return of 26.12% by 23.06 percentage points. This strong performance has attracted growing investor interest, with the number of holders more than tripling within a year.
To bolster its research and investment capabilities, ICBC Credit Suisse integrates active investing with quantitative strategies, broadening alpha sources through a self-developed "Quantitative Investment Research Platform." This system supports the entire investment process—pre-investment, during investment, and post-investment—for index and quantitative strategies. It incorporates functions such as data cleaning, research support, strategy tracking, performance attribution, and trading, leveraging common quantitative algorithms to enhance research efficiency and systematically implement quantitative frameworks.
Note: Past performance of indices and funds is not indicative of future results and does not guarantee fund performance. Investors should carefully review fund documents, including the fund contract and prospectus, and consider their risk tolerance before investing. Funds investing in equities carry higher volatility risks.
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