In 2025, the private fund industry has reached a milestone, with total assets under management surpassing RMB 22 trillion. Several hedge funds have exceeded RMB 10 billion in scale, and numerous products have hit record-high net values.
Despite November's market volatility in A-shares, leading to slight pullbacks for billion-RMB hedge funds, many still delivered positive returns, significantly outperforming major indices year-to-date.
Sources reveal that several discretionary hedge funds, including Yuansheng, New Silks, Foresight, Tongben, and Tongyuan, saw their flagship products achieve over 50% returns this year. Quantitative hedge funds performed even more impressively, driven by the popularity of small- and mid-cap index enhancement strategies. Products tracking the CSI 1000 and CSI 2000 indices from firms like Minghong, Century Frontier, Mengxi, and Longqi posted gains exceeding 60%.
**Hedge Funds Deliver Strong Performance** November saw A-shares enter a consolidation phase with accelerated sector rotation. While billion-RMB hedge funds faced short-term pressure, their overall performance outpaced major indices, demonstrating strong risk management.
Data shows that by end-November 2025, 73 billion-RMB hedge funds with disclosed performance dipped 0.27% for the month, but 42 (57.53%) posted positive returns. Quantitative funds stood out, with 45 such firms averaging a 0.66% gain.
Year-to-date, billion-RMB hedge funds collectively returned 29.44%, with 97.26% in positive territory. Among these, 19 funds exceeded 40% returns. Discretionary funds averaged 24.05%, while quantitative counterparts surged 33.28%. Despite trailing quant peers, select discretionary funds like Yuansheng and Foresight saw flagship products rise over 50%, with net values rebounding sharply.
Li Chunyu of Rongzhi Investment noted that quant strategies' broad stock coverage, high turnover, and model discipline enabled them to capture short-term opportunities and mitigate risks in volatile markets, generating substantial alpha.
Hybrid "discretionary + quant" strategies averaged 20.39% returns, lagging other approaches but with all six tracked firms in positive territory, including standout performers like Xuanyuan Investment and Yinye Investment.
**Quantitative Strategies Shine as Small-Cap Boom Drives Gains** Quantitative funds have been standout performers this year, with top firms generating over 30% alpha, particularly via small/mid-cap index-enhanced strategies.
Among CSI 1000 index-enhanced products, 30 of 57 tracked funds surpassed 50% returns. CSI 2000 index products were even stronger—9 of 11 gained over 60%, including two above 70%. Market-neutral strategies also excelled, with products from Longqi, Minghong, and SquareSum exceeding 60%.
The CSI 2000 index surged 33.49% YTD, far outpacing the CSI 300 (+16.69%), CSI 500 (+24.98%), and CSI 1000 (+24.35%). Of 45 billion-RMB quant funds, only four returned below 20%, while 14 topped 40%.
Mengxi Investment attributed quant outperformance to converging factors: capital rotation toward small-caps, strong benchmark performance (e.g., CSI 2000), elevated trading volumes, and improved alpha capabilities through tech/strategy upgrades. The firm highlighted its multi-frequency alpha approach and talent investments as competitive edges.
Century Frontier added that small-cap indices’ higher stock count and dispersion allow greater flexibility for enhancement strategies, while their liquidity and volatility enable quant models to exploit pricing inefficiencies more effectively.
**Outlook: Market Poised for Further Gains** Major hedge funds remain bullish on A-shares’ medium-term prospects.
Xing Shi Investment noted that Q3 2025 confirmed an earnings trough, ending three years of declines—laying groundwork for a bull market. While valuation expansion drove recent gains, future performance will hinge on profit growth, supported by tech-driven trends and traditional sector recoveries. The firm favors AI, biotech, machinery, and defense sectors, alongside transport, consumer discretionary, and property plays.
Red Chip Investment highlighted RMB appreciation, property market stabilization, and improving capital market sentiment as tailwinds for Chinese assets. Historically, currency strength correlates with equity bull markets, potentially creating a "double boost" for valuations. The firm is deepening research on core holdings to identify entry opportunities.
Xuanyuan Investment cautioned that uncertainties around USD credit and AI valuations may persist, but market narratives could hold. With style rotation toward balance, the focus remains on high-growth niches to position for future rallies.
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