Since the market rally began on September 24, 2024, the CSI 300 Index has largely maintained a volatile yet upward long-term recovery trend. However, entering 2026, market style rotations have accelerated. Influenced by structural divergences, the actual investment experience for investors may differ significantly from that of 2025.
Wind data shows that in 2025, 29 out of 31 Shenwan primary industry sectors recorded positive annual returns, with only coal and food & beverage sectors posting negative annual performance. In contrast, since the start of 2026, sector rotation speed has noticeably increased. From the leadership of HALO assets—represented by non-ferrous metals, fuel energy, and power grid equipment—around the Spring Festival, to the high-frequency rotations within specific AI segments like memory and optical modules after March, the difficulty for investors in identifying and capitalizing on market trends has risen sharply.
The rapid increase in market volatility is not without precedent. As early as 2023, Ray Dalio, founder of Bridgewater Associates, repeatedly warned about the potential global debt crisis following excessive monetary expansion. Starting in 2024, with the rapid iteration of AI technology, Dalio incorporated the potential macroeconomic impacts of technological revolutions into his perspectives.
Dalio suggests that the convergence of a late-stage global debt cycle and the wave of technological revolution—a dual-cycle resonance—is rendering the investment patterns that investors have grown accustomed to over the past 40 years ineffective. The once-reliable "formula" for diversified asset allocation across major categories urgently requires updating.
Echoing Dalio's views, Xu Xinyuan, a FOF fund manager at ICBC Credit Suisse, further highlights the current challenges in tactical asset allocation from the perspective of domestic investors: Cyclical issues are deeply intertwined with secular trends, leading to increased complexity in decision-making for ordinary investors. The balanced diversification strategy, once considered a "free lunch" in asset allocation, is seeing its effectiveness diminish, with growing skepticism about its benefits.
Xu Xinyuan believes that the methodology of balanced diversification to navigate cycles remains valid. However, during this unique period of simultaneous "shifts" across multiple cycles, the most crucial task for investors is to identify more effective balanced diversification methods for the current phase. This, he notes, is the primary responsibility of FOF fund managers who specialize in major asset allocation.
**The Role of Public FOFs in Asset Allocation**
In April 2026, Huachuang Securities released a research report titled "Where Has Household Savings Flowed To?" According to the report, by the end of the first quarter of 2026, domestic household demand for wealth management was growing rapidly, with increased interest in non-traditional assets beyond stocks and bonds, such as QDII and commodities. Against the backdrop of persistently low risk-free interest rates and the gradual weakening of real estate's investment appeal, domestic households are accelerating their allocation to various financial assets.
From the perspective of household asset allocation, Xu Xinyuan argues that financial instruments meeting this demand should satisfy three basic requirements: a broader asset allocation scope, stronger financial inclusivity, and sufficient investment strategy capacity. This is because, in many scenarios, "concentrating on a single bet is risky." Investors need to consider various hypothetical situations, ensuring their portfolios can maintain relatively stable performance across different environments, rather than excelling in one scenario while underperforming in another.
Translating this perspective into investment philosophy, Xu Xinyuan contends that in the current complex macroeconomic environment, the importance of balanced and diversified asset allocation should not be overlooked; in fact, it has become even more critical. Although correlations among major asset classes have increased significantly in recent years, somewhat diminishing the volatility-reduction benefits of balanced diversification, the core principles of risk exposure dilution and diversification of return sources remain unchanged.
"Diversification, this 'free lunch,' might have once been a full-course meal; now it's more like takeout, but it still fills you up." Therefore, Xu Xinyuan believes that, while controlling the overall exposure to risky assets, thorough balanced diversification remains one of the practical choices for ordinary investors to navigate the current complex cycle.
If thorough balanced diversification is considered a key constraint in asset allocation, Xu Xinyuan suggests that FOFs might be one of the more suitable financial instruments. In his view, the FOF investment framework can be summarized in three principles: avoid extreme market timing, avoid extreme style bets, and avoid extreme sector concentration.
Since the market rally on September 24, 2024, numerous cases have emerged of investors achieving outsized returns by betting heavily on specific sectors. However, profiting from sector rotations is easier said than done. Very few investors can consistently succeed at rotation, and a significant portion of such success may involve an element of luck.
As funds that primarily invest in other funds, FOFs inherently provide a "secondary diversification" effect. Xu Xinyuan argues that the true moat for FOF fund managers lies in their broader investment scope, the ability to leverage the expertise of excellent fund managers, and constructing a more favorable risk-return profile through balanced diversification across multiple assets.
In Xu Xinyuan's view, amid the broader trend of household wealth shifting from deposits and real estate to financial assets, FOFs, with their multi-asset allocation attributes, inclusive positioning, and substantial strategy capacity, are gradually becoming one of the important tools for meeting household wealth management needs.
**The Role of FOF Fund Managers**
Once the asset allocation function of FOFs is clearly defined, the portfolio construction capability of FOF fund managers becomes the most critical factor influencing investor experience.
Xu Xinyuan states that the core competency of FOF fund managers lies not in macroeconomic or sector analysis, but in portfolio construction, risk control, fund research, and the granularity of underlying asset analysis. This is because active equity fund managers who focus on macro, industry, and style tracking are already highly skilled. The important task for FOF fund managers is to identify and select these excellent managers, not to replace them.
Not engaging in detailed macro or sector research does not mean conducting no research at all. In Xu Xinyuan's view, while FOF fund managers do not emphasize timing, they still need to consistently examine the fundamentals and correlations of underlying assets, various fund strategies, and the risk budget of the FOF portfolio. "The most important aspect of my investment process is identifying assets with favorable long-term risk-return profiles and diversification benefits. Based on risk-return objectives, I establish a strategic asset allocation and then make limited tactical deviations based on my research."
Within this portfolio construction framework, Xu Xinyuan broadly categorizes domestic funds into three types: style funds, sector funds, and all-market funds. He notes that conventional public fund classifications are relatively broad. He personally prefers to separate quantitative factors like value and small-cap into distinct style fund categories and uses quantitative metrics for refined screening within each category.
Regarding fund selection logic, Xu Xinyuan tends to prioritize strategy selection before manager selection. The long-term effectiveness of the strategy itself is the primary criterion, followed by identifying excellent fund managers who consistently adhere to that strategy.
"If 100 people implement a particular strategy, and those who performed well in the past are more likely to continue doing so in the future, then it's worth making diversified allocations within that strategy. However, if there's almost no statistical correlation between past and future performance, it's likely just random noise, requiring caution," Xu Xinyuan summarizes his fund selection insights after long-term research.
In practice, after selecting a strategy, Xu Xinyuan typically holds 3-5 funds of the same type and strategy in a diversified manner and further diversifies at the underlying stock level to mitigate homogeneity risk.
Adhering to the principle of strategy persistence and considering the 2026 market environment, Xu Xinyuan emphasizes the dynamic balance of allocations across five asset categories: technology, pro-cyclical, resource-cyclical, dividend-yielding, and bonds. Technology corresponds to the AI industry cycle, pro-cyclical to the high-quality development trend, resource-cyclical to global commodity supply constraints and monetary system restructuring, dividends to the stable cash flow premium in a low-interest-rate environment, and bonds to macro liquidity and safe-haven demand. The drivers among these five asset categories are independent or even counteractive, forming a natural foundation for balanced diversification.
Even within these asset categories, Xu Xinyuan emphasizes a balance between win rate and payoff. For example, within the resource-cyclical theme, he tends to favor commodities over commodity stocks. This is because the pricing of commodity stocks is influenced by both commodity prices and the operational factors of listed companies. While they can provide significant upside when these factors align, their correlation is generally weak most of the time.
Typically, FOFs find it challenging to engage in tactical allocation, or the cost-effectiveness of doing so is lower compared to active equity products that directly invest in individual stocks. This requires FOF fund managers, in the portfolio construction process, to shift focus from pure return maximization to pursuing an optimal overall risk-return profile for the portfolio.
While investors' short-term speculative needs are certainly worth addressing, for FOFs, their product design inherently caters to an investor base more concerned with portfolio holding experience and long-term risk-adjusted returns.
**Concluding Remarks**
Since the beginning of 2026, investors have experienced both the阶段性 leadership of HALO assets and high-frequency rotations within AI themes. How to reasonably allocate household assets according to one's own risk tolerance has become a core issue perplexing investors in their 2026 asset allocation planning.
Xu Xinyuan believes that for ordinary individual investors, rather than pursuing the "next big trend," it might be more prudent to acknowledge one's limitations and instead construct an investment portfolio that "does not rely on catching trends." In his view, one of the potential risk points for the market in the second half of 2026 is the uncertainty in the liquidity environment. This could make it difficult to precisely calculate overall expected returns for 2026 and may lead to further amplification of market volatility.
Based on this assessment, Xu Xinyuan's allocation advice can be condensed into one sentence: Adhere to strategic asset allocation and maintain diversification; control the total exposure to risky assets and exercise restraint in tactical allocations.
In an environment with reasonable opportunities but heightened volatility, thorough diversification can reduce volatility and improve investment psychology. Conversely, insufficient diversification and excessive concentration can amplify volatility, potentially creating a vicious cycle of deteriorating sentiment. For ordinary individual investors, achieving genuine balanced diversification at the level of underlying asset correlations may be the key to successfully navigating cycles. FOF investment portfolios, which naturally pursue balanced diversification and offer a wider investable universe, could serve as one of the financial tools for investors to refine their asset allocation.
Note: This interview was conducted on April 23, 2026.
Risk Disclosure: The views presented are for reference only, are time-sensitive, and do not constitute investment advice or return promises, nor do they represent the future specific allocation direction of any fund. Fund managers manage and utilize fund assets in accordance with the principles of due diligence, honesty, creditworthiness, and prudence, but do not guarantee that a fund will necessarily be profitable, nor do they guarantee a minimum return. Past fund performance is not indicative of future results. The performance of other funds managed by a fund manager does not guarantee the performance of this fund. Funds carry risks. Before investing in a fund, investors should carefully read the "Fund Contract," "Prospectus," "Fund Product Key Facts Summary" and their updates, and other legal documents. After fully understanding the product details, fee structure, fee standards of various sales channels, and considering the suitability opinions of sales institutions, investors should choose investment products suitable for their own risk tolerance. Fund investment requires caution.
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