For many investors, 1% has been the lower expected yield threshold for allocating to money market funds. Recently, numerous money funds have been breaching this "psychological barrier."
Data from Tonghuashun shows that as of June 23, the 7-day annualized yields of 250 money market funds across the market have fallen below 1%, with some products even dropping below 0.5%. Back in 2014, the annualized yields of some popular cash management products once exceeded 6%. Over more than a decade, yields have fallen by over 80%, with 10,000 yuan earning less than 0.3 yuan per day—the era of effortless returns is long gone.
The persistent decline in yields of traditionally stable products has directly altered household asset allocation behavior.
Central bank data indicates that in April and May 2026, household deposits decreased by a combined 2.05 trillion yuan, marking the largest consecutive two-month decline in nearly a decade. During the same period, deposits at non-bank financial institutions, represented by wealth management products, funds, and insurance, increased significantly by 3.61 trillion yuan.
The "seesaw" effect of one rising and the other falling is clearly visible—funds are flowing out of bank deposits and money market funds, seeking alternative directions with greater income potential.
Where Has the Trillion in Deposits Moved To?
Looking at the data, a clear trend is emerging.
Wind data shows that as of the end of the first quarter of 2026, the total scale of "fixed income plus" funds across the market has exceeded 3 trillion yuan. Among them, secondary bond funds have become the main driver of scale growth, currently reaching 2 trillion yuan. In terms of growth rate, since 2025 alone, the scale of secondary bond funds has increased by 1.32 trillion yuan.
Data source: Wind, compiled by Guotai Asset Management, as of March 31, 2026. The scale statistics for "fixed income plus" funds include: hybrid primary bond funds, hybrid secondary bond funds, bond-biased hybrid funds, and convertible bond funds. The fund operation history in China is relatively short, and past performance is not indicative of future results.
More than doubling in size in just over a year, investors are voting with their feet. Secondary bond funds are becoming the primary destination for funds moving out of deposits.
Why This Product?
The return potential of products like money market funds and pure bond funds is gradually narrowing, while the high volatility of equity markets deters low-risk-tolerance investors. The positioning of secondary bond funds fits precisely in the middle: a bond allocation of no less than 80% provides foundational income, while an equity asset allocation of no more than 20% captures opportunities for excess returns.
With a clear strategy and transparent risk-return characteristics, secondary bond funds can be considered the "fixed income plus" category with the lowest understanding and allocation cost. Against the backdrop of declining deposit rates and falling money market fund yields, secondary bond funds are becoming the "new foundational holding" in household asset allocation.
The "Cape Verde" of the Fund World
Since June, amid factors such as rising expectations for Federal Reserve interest rate hikes, volatility in the A-share market has intensified significantly. Many investors are concerned that the equity portion of "fixed income plus" products might drag down overall performance.
The table below shows the year-to-date performance and maximum drawdowns for several types of "fixed income plus" product indices:
Data source: Wind, data from January 1, 2026 to June 23, 2026. Short-term index performance is for reference only and does not represent future performance, nor does it constitute a promise or guarantee of fund performance.
It can be observed that secondary bond funds, while maintaining relatively low drawdown levels, also exhibit relatively decent return performance. Of course, the data period captured here is still relatively short, and performance will certainly fluctuate across different time windows. However, it can still reflect the value proposition of secondary bond funds: when market sentiment is high, they may not rise as much; but in volatile markets, they are likely to maintain some resilience while providing a defensive baseline.
This is essentially the "Cape Verde" of the fund world.
Whether you followed the World Cup main event or not, you've likely come across mentions of "Cape Verde" recently, perhaps even looked for it on a globe. This island nation's team, from a country with a total population of only 546,000, has a combined team value that likely isn't even half the value of a single Spanish star player's leg.
Yet, they managed draws against both Spain and Uruguay, two former world champions. Post-match comments were filled with the same sentiment: "How can human feet possibly compete with Cape Verde?"
Cape Verde's tactics are extremely simple: they don't press high, don't take excessive risks, and don't try to outplay the opponent in terms of style. Most players participate in defense within their own half, with overall possession possibly less than 30%. Yet, they strictly hold their defensive line and seize opportunities when the opponent makes mistakes to equalize the score.
Doesn't this resemble the approach of secondary bond funds? The bond allocation is that resilient defensive line, providing a cushion during market turbulence, while the equity allocation is the counter-attacking forward, striking when opportunities arise, preserving the potential to equalize or even take the lead.
There's a saying in football: to see how far a team can go, look at its midfield and defense. Secondary bond funds are the midfield and defense in an investment portfolio. In volatile markets, rather than betting heavily on a single direction, it's better to first solidify the formation, using time to create space.
Guotai Dingli Bond: Setting Up Your Midfield and Defense Formation
In the context of falling interest rates and market volatility, investors seeking low-risk allocation can consider the Guotai Dingli Bond (Class A 025966 / Class C 025967).
Fund manager Cheng Yao has 9 years of experience in the securities industry and 5 years of investment management experience. Starting as a macro researcher, she possesses extensive experience in major asset allocation analysis.
Regarding investment strategy, the Guotai Dingli Bond adopts a "fixed income foundation, equity enhancement" approach: the bond allocation is no less than 80%, selecting high-grade credit bonds and flexibly allocating long-duration interest rate bonds to generate foundational returns; the equity allocation is controlled around 10%, employing a barbell strategy—allocating to dividend/high-yield assets on one end and growth-oriented sectors on the other, balancing offense and defense.
Looking at the performance of similar products managed by Cheng Yao, the Guotai Tongli fund achieved a one-year return of 9.37% with a maximum drawdown of only -2.47%, lower than the average maximum drawdown of similar funds (-3.41%); the Guotai Xinli fund achieved a one-year return of 9.78% with a maximum drawdown of only -1.72%, also lower than the average for similar funds (-3.41%), demonstrating decent return resilience while strictly controlling drawdowns.
Data source: Galaxy Securities, Wind, Guotai Asset Management, data as of: April 30, 2026; fund performance has been verified by the custodian. The peer average refers to the Wind secondary classification - bond-biased hybrid funds. The fund operation history in China is relatively short. Past fund performance is not indicative of future results. The historical performance of other funds managed by the fund manager does not guarantee the performance of this product.
Behind the impressive performance lies team support. The fixed income team at Guotai Asset Management has weathered multiple market cycles and is particularly prudent in credit risk management, having established a strict internal rating system and risk control processes. Since 2020, in a market environment with frequent credit bond defaults, the fixed income team has maintained a "zero" default record, using rigorous defense to secure the midfield and defensive formation for investors.
Final Thoughts
As the era of effortless returns passes, everyone must re-examine their wealth "formation."
Admittedly, who wouldn't want their investment portfolio to be star-studded, like Portugal or England? But what truly determines how far a team can go is never just the brilliance of the forwards, but the depth of the midfield and defense.
Cape Verde is an inconspicuous island nation, yet it has established itself on the world's biggest football stage with a simple defensive philosophy. The thinking behind secondary bond funds is similarly straightforward: use bonds to defend the baseline, use equities to seek resilience, aiming not for quick wins but for longevity in volatile markets.
Don't underestimate the "inconspicuousness" of the Cape Verdes. In a low-interest-rate era, it might be the exact piece your portfolio needs.
Guotai Dingli Bond
Class A: 025966 Class C: 025967
Risk Disclosure
Funds carry risks, and investment requires caution. Views are for reference only and may adjust with changing market conditions; they do not constitute investment advice or promises. Before investing, investors should carefully read the "Fund Contract," "Prospectus," "Product Key Facts Statement," risk disclosure documents, and other legal documents to understand the fund's risk-return characteristics and determine whether the fund is suitable for their risk tolerance based on their own investment objectives, investment horizon, investment experience, and asset status.
The Guotai Dingli Bond is a bond fund. Theoretically, its expected returns and expected risks are higher than those of money market funds but lower than those of hybrid funds and equity funds. When this fund invests in Hong Kong Stock Connect-listed stocks, it will face risks specific to the Hong Kong Stock Connect mechanism due to differences in investment environment, investment targets, market systems, and trading rules.
Fund fee rates are as follows:
Note: The historical performance of funds managed by fund manager Cheng Yao and their benchmark performance are listed below:
Guotai Min'an Zengli A (Inception date: 2012/12/26, transformed on 2021/11/24 with changes to investment scope, strategy, etc. Benchmark: 90%*ChinaBond Composite Total Price Index Return + 8%*CSI 300 Index Return + 2%*CSI Hong Kong Stock Connect Composite Index Return. Managed by Zhang Yige from 2012/12/26 to 2015/6/25, Han Zhehao from 2015/6/25 to 2020/5/12, Wang Wei from 2020/5/12 to 2023/7/24, Cheng Yao from 2022/12/30 to present). Performance/Benchmark for 2021-2025: 2.29%/0.43%, -8.62%/-1.48%, 0.69%/0.69%, 5.41%/6.22%, 6.90%/0.47%.
Guotai Juli (Inception date: 2018/03/27. Benchmark: 50%*CSI 300 Index + 50%*ChinaBond Composite Index Return. Cheng Yao from 2021/07/09 to present, Cheng Zhou from 2018/03/27 to present). Performance/Benchmark for 2021-2025: 5.52%/-1.21%, -2.09%/-10.80%, 1.21%/-4.68%, 3.62%/11.73%, 5.24%/9.16%.
Guotai Xinli A (Inception date: 2020/01/21. Benchmark: 15%*CSI 300 + 5%*CSI Hong Kong Stock Connect Composite Index + 80%*ChinaBond Composite Index. Cheng Zhou from 2020/1/21 to 2021/7/9, Cheng Yao from 2021/07/09 to present). Performance/Benchmark for 2021-2025: 9.44%/2.81%, -1.98%/-1.17%, 1.10%/1.45%, 3.57%/9.81%, 9.09%/4.54%.
Guotai Tongli A (Inception date: 2021/02/05. Benchmark: 15%*CSI 300 + 5%*CSI Hong Kong Stock Connect Composite Index + 80%*ChinaBond Composite Index. Cheng Zhou from 2021/2/5 to 2025/4/29, Cheng Yao from 2021/07/09 to present). Performance/Benchmark since inception to 2025: 8.55%/1.41%, -2.26%/-1.17%, 1.42%/1.45%, 3.12%/9.82%, 8.65%/4.54%.
Guotai Heli A (Inception date: 2025/3/14. Benchmark: ChinaBond Composite Total Price Index Return*80% + CSI 300 Index Return*15% + CSI Hong Kong Stock Connect Composite Index Return (adjusted for valuation exchange rate)*5%. Cheng Yao from 2025/3/14 to present). Performance/Benchmark since inception to 2025: 4.90%/3.10%.
Data source: Product periodic reports, Wind, Guotai Asset Management, data as of 2025/12/31. Products established for less than 6 months are not listed.
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