The first quarter of 2026 presented a contrasting picture for China's quantitative private fund industry. On one hand, assets under management surged dramatically, with the number of quantitative firms managing over 10 billion yuan expanding to 61, continuously setting new historical records. The industry's total AUM approached an unprecedented 2 trillion yuan. On the other hand, alpha generation cooled significantly. Amid global financial turbulence triggered by Middle East conflicts, quantitative models, once seen as turning investments to gold, now face dual challenges of mean reversion and strategy crowding. Some institutions have already reported negative alpha or even losses for the year.
This divergence between scale and performance is pushing this highly sought-after sector into a new phase of differentiation.
The elite group of firms managing over 10 billion yuan expanded to 61, highlighting a more pronounced concentration at the top. According to the latest QIML statistics, by the end of the first quarter, the number of domestic quantitative private funds with AUM exceeding 10 billion yuan had increased to 61, up by 9 from the end of 2025. Conservatively estimated, the industry's total AUM surpassed 1.8 trillion yuan, a increase of nearly 400 billion yuan from the end of the previous quarter and a significant rise of approximately 800 billion yuan compared to the same period last year.
Eight quantitative firms joined the "10-billion-yuan club" in the first quarter: Banyan Private Fund, Hongxi Fund, Liang Kui Private Fund, Luoshu Investment, Mingxi Capital, Shenyi Investment, Tuote Investment, and Youmeli Investment. The continuous influx of new players further raised the industry's overall scale ceiling.
The hierarchical structure within the quantitative sector became clearer. Firms like Bei Yang Quant, Jingeliangrui, Niuda Investment, and Weiguan Boyi entered the 15-20 billion yuan bracket. Mengxi Investment, Niankong Nianjue, Turing Fund, Zhengding Private Fund, and Zhuoshi Fund stepped into the 20-30 billion yuan range. Evolution Theory Assets reached the 30-40 billion yuan tier. Maoyuan Quant and Tianyan Capital stood in the 40-50 billion yuan bracket. Blackwing Assets and Wanyan Assets crossed into the 50-60 billion yuan range. Chengqi Fund joined the 60-70 billion yuan echelon.
Notably, the "Big Four" of quantitative investing—Huanfang Quant, Jiukun Investment, Minghong Investment, and Yanfu Investment—saw their scales climb further, entering the 80-90 billion yuan range, thereby solidifying their leading positions.
Some institutions achieved rapid, multi-tier growth. Qianxiang Investment and Zhengying Assets jumped two levels directly into the 20-30 billion yuan bracket. Pingfanghe Investment leaped to the 30-40 billion yuan tier. Longqi Technology and Mingshi Fund vaulted over multiple steps to quickly join the 50-billion-yuan camp.
It is noteworthy that the number of quantitative institutions with AUM exceeding 50 billion yuan has now reached 12, doubling from the same period last year. Industry concentration continues to increase, underscoring the Matthew Effect.
The rapid expansion of quantitative private funds can be attributed to multiple converging factors. Quantitative strategies have demonstrated strong appeal in volatile markets due to their relatively stable alpha in recent years, consistently attracting capital from bank wealth management products, securities asset management, and high-net-worth clients. Furthermore, products like index-enhanced and market-neutral strategies are highly standardized, facilitating rapid replication and promotion through distribution channels, which provides a solid foundation for scaling up.
Additionally, advancements in AI technology and computing power have, to some extent, enhanced the investment research capabilities of quantitative firms, further attracting incremental capital. Particularly against the backdrop of increased volatility in active equity investments, some capital favors the stability offered by quantitative strategies, propelling further industry growth.
In stark contrast to the surging AUM, the performance of quantitative private funds faced significant pressure in the first quarter. Since March, escalated tensions in the Middle East triggered severe volatility in global financial markets, with US stocks and bonds experiencing sharp declines, and even South Korean stocks triggering a circuit breaker. The A-share market was not immune. Data shows that the CSI 500, CSI 1000, and CSI 2000 indices fell by 12.02%, 10.99%, and 10.70% respectively in March.
Against this backdrop, the core product of quantitative private funds—index-enhanced strategies—suffered notable drawdowns. Data from multiple channels indicates that in March, the declines for most leading quantitative firms' index-enhanced and "all-weather" index-enhanced products were concentrated between 9% and 12%.
More critically, alpha generation for quantitative products has shown significant divergence this year. Products from some institutions not only failed to outperform their benchmarks but also generated negative alpha, even beginning to erode absolute returns. Quantitative strategies, once marketed for their "steady alpha," are undergoing a relatively rare systemic stress test.
Industry insiders offer different perspectives on this round of alpha drawdown. Fang Ming, Vice President of Zhengren Quant, noted that significant style returns in the first three quarters of last year allowed quantitative strategies to capture factor returns effectively. However, the past two quarters have seen pronounced mean reversion, with衰减 of original factor returns leading to weaker strategy performance.
Wang Xiong, Investment Director of Siyuan Quant, pointed out that performance varies significantly among different index-enhanced products. Alpha for products tracking the CSI 1000 and CSI 2000 indices remains relatively stable and substantial. The main challenge lies primarily with CSI 500 index-enhanced products. While generating alpha for the CSI 300 has historically been difficult, the challenge for enhancing the CSI 500 is now also rising noticeably. Last year, achieving around 10% alpha for a CSI 500 enhanced product was considered excellent within the industry.
Wang Xiong explained several reasons: the limited number of constituents in the CSI 500 offers a narrower stock selection universe, where individual stocks have a larger impact on overall alpha. Simultaneously, these strategies attract the most participants, leading to strategy crowding. In contrast, indices like the CSI 1000 and CSI 2000 have more constituents, providing a broader selection universe and lower strategy crowding, making it easier to achieve sustained and substantial alpha, with excellent products potentially realizing annual alpha exceeding 20%.
Regarding how to address alpha衰减, Fang Ming believes quantitative institutions must either adhere to their specific style to highlight their unique characteristics and value, or opt for a more balanced style to enhance the stability of their alpha.
Concurrently, the issue of "crowded trades" is becoming increasingly prominent. As the industry's scale expands rapidly, substantial capital flows into similar strategies and factor models, leading to converging trading signals and compressed return potential. When markets experience sharp volatility, concentrated position adjustments can amplify impact costs, further eroding alpha.
A representative from a leading quantitative firm admitted, "When more and more capital is doing similar things, the 'alpha' itself gets diluted."
Furthermore, Wang Xiong suggests that investors may need to gradually adjust their return expectations for index-enhanced products. The fundamental goal of these products is to strive for deterministic excess returns over the benchmark index in the long run. Short-term, periodic drawdowns are a very normal market phenomenon.
Index enhancement does not aim to outperform the index every week or month; its value is more evident in the long-term alpha generation capability across market cycles. Therefore, viewing short-term fluctuations rationally and focusing on the compound effect of long-term holding may represent a more mature investment mindset.
The quantitative private fund industry now stands at a new crossroads. While scale expansion continues and the industry ceiling keeps rising, the difficulty of generating alpha has increased significantly, challenging the effectiveness of existing strategies.
A head of a Shenzhen-based quantitative firm stated that future industry competition will shift from a pure scale race to a deeper contest of capabilities. This includes factor discovery and model iteration capabilities, trade execution and impact cost control, multi-strategy and multi-asset allocation abilities, and risk control and drawdown management systems.
In this process, leading institutions, leveraging their technological积累 and resource advantages, are likely to further consolidate their leading positions. Meanwhile, small and medium-sized institutions lacking differentiated capabilities may face gradual淘汰 in the intensifying competition.
Beyond the "index-enhanced strategy" itself, the investment value of the "benchmark index" is crucial. While there are attempts to create enhanced products based on new indices like A500 or dividend-focused indices, most still anchor to existing public indices.
Wang Xiong believes that as quantitative managers, they can go a step further. Instead of merely enhancing existing indices, they can utilize scientific fundamental research and AI technology to participate in "creating high-quality indices that better represent the future direction of economic development." This itself is a practice advocating long-term and value investing.
In Wang Xiong's view, by combining in-depth fundamental research with artificial intelligence, it's possible to construct index series that more heavily weight the development direction of "new quality productive forces," such as a "Siyuan New Quality 500 Index," and indices focusing on sub-sectors like new energy, advanced manufacturing, information technology, new consumption, and pharmaceuticals.
This two-tier model of "high-quality index + quantitative enhancement" could, on one hand, help alleviate the problem of excessive strategy crowding on a few traditional indices. On the other hand, it could make investments more closely aligned with the long-term direction of economic transformation and industrial upgrading, Wang Xiong said.
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