As we reflect on the tumultuous financial landscape of 2024, it's evident that the performance of actively managed equity funds has dipped below expectations, with average returns failing to meet the benchmarks set by a variety of investment productsIn fact, those who managed to secure an annual investment return of around 4% would find themselves outperforming the average of these actively managed fundsHowever, they would likely still lag behind passive index funds, as well as a host of other investments targeting the likes of the Nasdaq, gold, Hong Kong stocks, and burgeoning sectors such as artificial intelligence (AI). Even bond funds, traditionally seen as lower-risk investments, would surpass these actively managed equity funds in 2024, highlighting a fundamental shift in market behavior.

The year 2024 was punctuated by international instability, which propelled gold funds into a leading position within global investment portfolios as investors increasingly sought safety in precious metals

Following close behind were Qualified Domestic Institutional Investor (QDII) funds focused on overseas markets like the United States and Hong KongThis trend underscores a growing acceptance and understanding of diversified asset allocation strategies among investors, as they seek to mitigate risk and enhance returns through more robust portfolio construction.

Within China's A-share market, a clear delineation emerged among various sectorsHeavyweight industries such as banking and non-bank financial services experienced notable gains, while technology sectors involving communication and electronics also proved to be quite dynamicHowever, consumer goods, photovoltaic (solar energy), and pharmaceuticals underperformed, underscoring a significant divergence in sectoral performanceThe broad-based index strategies adopted by many passive index funds allowed them to capitalize on overall market beta returns, yet this broad approach failed to dramatically alter the ongoing dilemma of underwhelming returns for individual equity investors.

Focusing specifically on actively managed equity funds, a handful succeeded in capitalizing on opportunities within the high-potential AI sector

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Nevertheless, many remained ensnared in the metaphorical "long slope and thick snow" stories, struggling to deliver satisfactory returnsThe current statistics reveal that the average returns for these actively managed equity funds fell below many investment types, ranking only above a few categories such as short bonds, equity funds of funds (FOFs), monetary funds, and hedge funds.

On the bond market front, a narrative of "asset scarcity" dominated as bond funds entered a remarkable bull market phaseWith monetary policies leaning towards “moderate easing” as of December 2024, enthusiasm for bullish positions further intensifiedThis led to rapid declines in interest rates, with various tenors consistently touching historic lowsNotably, the highest returns from 30-year government bond ETFs exceeded 20% over the year, demonstrating the significant gains available for astute bond investors.

When examining money market funds, the ongoing decline in risk-free rates has resulted in diminishing yields, leading to an average annual return that fell to just 1.71%. The exceptionally low yields momentarily captivated much public interest, even stirring discussions around the future viability of money market funds as a reliable investment vehicle.

Passive index funds have become a dominant narrative in 2024, characterized by their impressive growth.

The fundamental role of these funds is to track index performance, relinquishing timing decisions to investors

But does this shift yield better investment experiences? Analyzing performance in isolation suggests that the challenges of extracting value from these fund types remain considerablePresently, there are a total of 2,873 index funds across the market, yielding an average annual return of 10.84% in 2024; this figure starkly contrasts with the disappointing metrics of actively managed equity funds, such as ordinary stock funds and equity-oriented mixed funds, which yielded less than 4%.

Delving deeper into the data reveals that the favorable average returns of index funds in 2024 are closely tied to the current structural configuration of investment products availableThe Shanghai and Shenzhen 300 index emerged as the most aggregated target for funds, with a staggering 106 funds tracking it, achieving an annual average return of 16.29%. Following this was the CSI 500 index, with 92 associated funds, although it is worth noting that it had not been operational for a full year, leaving it without annual return data.

Additional indices like the CSI 500 and the Growth Enterprise Board index exhibited positive returns throughout 2024. Among the various index products, merely four reported negative returns in a landscape where related offers exceeded twenty

These underperforming indices included the photovoltaic sector, North Securities 50, the Star Market 100, and specialty chemicals.

When evaluating yield sources, leading products were primarily from the financial sector's ETFs, with several achieving annual returns exceeding 40%—notable examples being the Huaxia CSI Hong Kong Financial ETF, E Fund's CSI Hong Kong Securities Investment Theme ETF, and the China Merchants CSI Bank AH Price Selected ETF.

Conversely, the biotechnology sector took a considerable hit, with several ETFs tracking vaccine and biotech indices reporting losses exceeding 25%. Related sectors, including photovoltaics, livestock breeding, and white liquor indices, also faced steep losses around 15%.

The story for actively managed equity funds remained sobering.

In stark contrast to the beta yield derived from broad-based index funds, the overall circumstances facing actively managed equity funds continued to wane in 2024. This was especially true for the once-promising sectors of consumer goods, pharmaceuticals, and photovoltaics, where securing any positive returns proved incredibly challenging

Observing larger funds within the market, for instance, those managed by notable fund managers such as Zhang Kun and Zhu Shaoxing, reflected annual returns falling below 2% for their respective offeringsOther funds managed by Liu Yanchun and Ge Lan reported losses of 9.71% and 16.74%, respectively.

Relatively stronger performance was noted among larger funds managed by Xie Zhiyu, Liu Huiying, and Dong Li.

Taking a longer view, the past three years have seen substantial losses for many of the aforementioned funds, often exceeding 30%. Focusing on five-year returns, funds like Ruiyuan Growth Value and China Euro Healthcare continued to reflect negative performance.

When we consider annual returns, a significant focus on AI investment appeared to be the key to navigating rough waters successfully.

Specifically, the Morgan Stanley Digital Economy fund achieved a staggering 70% return, topping annual performance charts

Fund manager Lei Zhiyong noted in the third-quarter report that demand within cloud computing and end-user applications remains robustHe stated, "We perceive that the digitalization and innovation propelled by AI are poised to inject tremendous momentum into social developmentThe Morgan Stanley Digital Economy Mixed Fund will continue to selectively pursue stocks within the digital and intelligent narrative to enhance fund asset growth."

However, it's essential to highlight that not all of Lei Zhiyong's funds reaped similar benefitsWhile the AI-focused Morgan Stanley Digital Economy achieved first place, the Morgan Stanley Wanzhong Innovation Mixed Fund, heavily invested in military industries, plummeted by 15%, accumulating near 40% losses over two years.

Thanks to significant holdings in the AI domain, various products under Caitong Fund Management, spearheaded by Jin Zicai, also secured impressive returns in 2024, with Caitong Prosperity Selection Fund surpassing a remarkable 50% annual yield.

Jin Zicai pointed out that the current market momentum appears primarily driven by liquidity-induced valuation advantages and suggests that investors remain on the lookout for companies with significant growth potential

Key areas of focus included overseas computing infrastructure (such as optical modules and communication PCBs), domestic computing infrastructure (AI chips), and new consumption trends (discount retail).

Ultimately, performances from actively managed equity funds in 2024 maintained a troubling trend of high varianceMany of these funds reported losses exceeding 30%, with some suffering declines greater than 60% over the past three yearsNotable funds like Jinyuan Shun'an Premium Selection reported annual losses of 36.45%, with additional funds like Furong Value Selection, Huashang Intelligent Life, and Tianzhi New Consumption also incurring substantial losses around or above 30%.

The bond fund landscape was characterized by a robust bull market.

In 2024, bond funds experienced an unprecedented surge, with medium- to long-term plain bond funds achieving an average yield of 4.62% and short-term bond funds nearing 3%, reflecting remarkable performance comparable to that of actively managed equity funds

Notably, the Pengyang China Bond-30-Year Government Bond ETF and Galaxy China's Zero to Three-Year Policy Financial Bonds produced annual returns of 22% and 19%, respectivelyAmong actively managed bond funds, Huatai Bosheng's Anya achieved nearly an 18% annual return, claiming the top spot in its class of medium and long-term bond fundsMeanwhile, short- to medium-term bond funds like Penghua Yongda and Jianxin Xinxing reported annual returns exceeding 7%.

In the world of commodities, gold continues its reign.

The year 2024 saw commodity funds, particularly those centered around gold, maintain the highest average returns, marking three consecutive years at the forefront in terms of yieldOver the past five years, these funds have reached an average annual return of 60%. Within the competitive gold fund sphere, yield differences among various companies were minimal, with E Fund's Gold ETF leading the pack at 27.57% returns, while Huarun Gold ETF achieved the highest performance at 75.67% over five years, solidifying its position as the largest gold fund by asset size.

The QDII paradigm shifted towards a global AI feast.

In 2024, the QDII funds excelled, with Southern China's Emerging Economy fund achieving the highest return at over 50% for a nine-month holding period