Many investors who jumped into popular tech-themed funds may not realize that the fund managers themselves were latecomers to the rally. In 2026, the hottest sector is undoubtedly technology, prompting a rush of retail investors to buy funds with top short-term returns. However, a closer look reveals that many of these funds only recently pivoted to AI-related holdings, shifting from consumer staples or healthcare to computing power and optical modules seemingly overnight. Investors thought they were riding the AI wave, but in reality, the fund managers were chasing high prices themselves. The result? When the tech sector corrected sharply in July, these late-arriving funds suffered far steeper losses. Investors are now left wondering whether they bought into a genuine AI fund or a "bag-holder" fund that simply chased the rally.
The new "style drift" regulations, effective from December 1, 2026, set a strict 80% investment threshold, leaving little room for fund managers to deviate from their stated investment themes. However, regulatory gaps and practical challenges continue to test the patience and wallets of fund investors.
1. "Selling Dog Meat Under the Sign of a Sheep's Head": What is Your Fund Actually Buying?
In the second quarter of this year, the AI tech sector experienced extreme volatility, while traditional sectors like consumer staples, dividends, and services remained sluggish. This stark divergence led to a massive wave of style drift, with numerous thematic funds abandoning their contractual mandates to chase the hottest trends. These funds now show clear characteristics of drift, with their performance completely disconnected from their stated investment objectives.
The most obvious example is consumer-themed funds. These funds are typically considered defensive holdings, focusing on low-volatility sectors like food and beverages, home appliances, and duty-free goods. However, in the second quarter, several major consumer funds completely overhauled their portfolios, selling off traditional consumer heavyweights and going all-in on the AI computing power supply chain. For instance, the 弘毅远方消费升级 fund, despite its name, had all of its top ten holdings in the second quarter report tied to the semiconductor and optical communication supply chain, including 兆易创新 (603986.SH), 北京君正 (300223.SZ), 芯源微 (688037.SH), and 长川科技 (300604.SZ). This indicates a clear shift toward AI computing infrastructure and domestic semiconductor substitution. Notably, all of the fund's top ten holdings were replaced in the second quarter.
This fund has been drifting from its consumer style since 2025, gradually shifting from consumer stocks to tech stocks. However, its frequent adjustments over the past two years have been poorly timed, missing the tech bull market rally while fully participating in the subsequent correction. It lost 6.93% in 2025 and 2.73% in the first quarter of 2026. While it gained 17.63% in net asset value (NAV) in the second quarter, it has since fallen 16.61% in the past month as tech stocks retreated.
Other consumer-themed funds, such as 恒生前海消费升级混合, 前海开源沪港深乐享生活混合, and 国投瑞银信息消费混合, have similarly drifted. Their contracts explicitly state a focus on consumer upgrades and daily life sectors, but their second-quarter top ten holdings are entirely composed of optical module and semiconductor hardware stocks like 中际旭创 (300308.SZ), 新易盛 (300502.SZ), 东山精密 (002384.SZ), and 源杰科技 (688498.SH), with traditional consumer stocks disappearing. These drifting funds benefited from the AI rally in the second quarter, seeing short-term NAV surges and ranking improvements. However, the risk was embedded: when the tech sector rapidly cooled in July, these "pseudo-consumer funds" followed tech stocks into a deep correction, with monthly drawdowns far exceeding those of genuine consumer funds. Investors seeking stable consumer investments ended up shouldering the enormous losses of a sector crash.
Beyond consumer funds, some dividend and reform-themed funds also abandoned their "stable" nature. These funds are typically safe havens for investors, focusing on low valuations, high dividends, and value blue chips with low volatility. However, in the second quarter, several value-focused funds collectively gave up their principles to chase the high-growth AI sector. For example, products like 建信改革红利, 金鹰改革红利混合, and 中加改革红利混合, which are positioned for reform and value investing, now have most of their top ten holdings in semiconductor equipment, optical communication, and computing hardware stocks.
Military-themed funds have also drifted, becoming "optical communication funds." A classic case is 招商核心装备. Its performance benchmark is 80% linked to military and high-end equipment, and its manager, 冯福章, is a well-known veteran in military research. However, the second-quarter report showed its top ten holdings had suddenly shifted to optical communication and AI computing power chain stocks, including 建滔积层板 (1888.HK), 剑桥科技 (6166.HK), 源杰科技 (688498.SH), and 光库科技 (300620.SZ), with at least seven directly related to optical communication. More controversially, the fund bought into the 建滔 group of Hong Kong-listed stocks at a high point in the second quarter, just as major shareholders were aggressively cashing out over HK$20 billion. In July, 建滔积层板 plunged 70%, causing 招商核心装备 A to fall 51% in a single month, making it the worst performer in the market. The fund's entire 40% gain from the first half of the year was erased, leaving it with an 18% loss for the year. In his quarterly report, 冯福章 wrote that he "continues to be optimistic about high-end equipment manufacturing," but the portfolio told a different story.
Cultural and health-themed funds have also abandoned their mandates. 华安文体健康 now lists stocks like 新易盛 and 天孚通信 as its top holdings, focusing on optical modules and semiconductors. 平安睿享文娱混合 is another example; its NAV surged 89.64% in the second quarter. The fund manager explained that the fund had "focused on technology directions closely related to the cultural and entertainment industry ecosystem." A closer look reveals that the so-called "cultural and entertainment tech" is entirely composed of AI servers and optical modules.
Another type of style drift occurs when a fund manager changes. For example, 恒越匠心优选混合 had a manager change on June 9, with 吴海宁 taking over. Just 20 days later, the fund's top ten holdings were completely overhauled, replacing consumer staples like milk tea, snacks, and baijiu with AI hardware stocks like 建滔积层板 and 建滔集团. The fund experienced a brief NAV surge from June 15, but a sharp decline followed in early July. Under 吴海宁's management, the NAV has fallen 28.31% in 60 days.
2. The Countdown to the End of Style Drift: Regulators Step In
Despite contractual constraints, why do so many funds still choose to drift? The root cause is not just fund managers chasing trends, but a systemic issue driven by short-term performance evaluation mechanisms and regulatory loopholes. The industry has long prioritized short-term rankings. If a fund's designated sector is underperforming, sticking to the rules means falling to the bottom of rankings, losing assets under management (AUM), being dropped from distribution channels, and seeing management fees decline. Drifting to chase hot sectors is the fastest way to boost short-term performance and retain AUM. Under pressure from distribution channels, AUM, and rankings, most funds find it difficult to hold onto unpopular sectors for long, making style drift an industry norm.
Furthermore, old fund contracts often have vague definitions and boundaries, lacking hard investment ratios or high-frequency monitoring mechanisms. Problems are only revealed in quarterly reports, leaving ample room for drifting. However, the chaos of years of style drift is about to face a complete overhaul. The industry's self-regulatory body, the Asset Management Association of China, has issued new guidelines on investment style management for thematic funds, effective from December 1, 2026. This landmark regulation introduces the strictest constraints to date: all thematic funds must invest at least 80% of their non-cash assets in their contracted sector, using an official unified theme database to prevent vague wording. Custodian banks will conduct daily high-frequency monitoring, and a style deviation lasting more than ten consecutive days will trigger a correction. Style drift will be directly included in the negative performance review of fund managers, linking it to bonuses, deferred compensation, and career ratings. This means that consumer-themed funds will no longer be able to arbitrarily invest in technology stocks, signaling the end of the "selling dog meat" era.
However, the new regulations also bring new industry debates and practical challenges. The rules only apply to funds with clear themes, leaving the massive market of flexible allocation funds unconstrained. These funds are not tied to any sector and can freely switch between growth, value, technology, and consumer stocks. As a result, style drift will not disappear but will likely shift en masse from thematic funds to flexible allocation funds, leaving the problem of "blind box" fund investing unresolved. The industry continues to debate whether a monitoring red line for style deviation should be added for flexible allocation funds.
The new rules require funds to adhere to their contracts and strictly control style drift, making style consistency a hard requirement. However, the current market environment, including distribution channels, intermediaries, and investors, still focuses solely on short-term returns. If a fund manager sticks to a contractual sector that is underperforming, they face the risk of poor rankings, large-scale redemptions, and product liquidation. The industry's biggest dilemma is now clear: how to balance the pressure of staying true to one's style and contract while potentially underperforming the market, leading to redemptions and AUM shrinkage? The regulators have curbed the behavior of drifting, but they have not changed the industry's short-term, profit-driven evaluation system. This is the deepest contradiction the public fund industry must resolve.
The story of style drift has been told for years. The year 2026 marks a turning point, but the adjustment to a new order is just beginning after the old one is broken. For ordinary fund investors, the core of long-term, stable investing is no longer about just looking at the fund name or short-term returns. It is about understanding the portfolio, identifying the investment style, and avoiding "blind box" drifting funds.
Comments