In a climate marked by heightened volatility in global financial markets, the public mutual fund FOF products are witnessing a resurgence, sparking a new wave of multi-asset allocation strategiesThe landscape is evolving, with various public funds cautiously entering the Chinese market to test their multi-asset FOF offerings while actively introducing concepts of diversified asset allocationThis development signals a fundamental shift in how investors are approaching portfolios in these uncertain times.

Recent observations indicate that assets such as gold and Real Estate Investment Trusts (REITs) are rapidly emerging as focal points for public mutual fund FOF productsNotably, the allocation of gold ETFs within certain public mutual fund FOFs has surged significantly, especially as we approach the fourth quarter of 2024. Industry experts suggest that through differentiated allocations in FOF products, niche assets are poised to reveal their unique advantages in terms of risk diversification and yield enhancementThis strategic pivot is not merely a trend but a reflection of a deeper recognition of the need for resilient financial strategies in the face of global economic uncertainties.

In the context of ongoing developments in public mutual funds, the concept of multi-asset allocation has inevitably taken center stageRecently, foreign-invested mutual funds have begun to experiment with multi-asset strategies in ChinaFor instance, in mid-January, Fidelity Investments launched its Fidelity Renyuan Stable Three-Month Holding Period Mixed FOF, which successfully raised 8.67 billion yuanThis placement not only marked it as the first globally diversified FOF strategy within newly established foreign investments but also placed Fidelity at the forefront of this market shift.

This fund was notably quick to attract investor interest; it commenced sales on January 6, 2025, and within just a week, the fundraising was concluded ahead of schedule, achieving official approval for establishment by January 15. Performance-wise, this fund has risen to one of the top three newly established FOF products in terms of scale in the preceding twelve months

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This achievement underscores the significance of foreign institutions recognizing the Chinese market's potential, alongside the growing allure of multi-asset allocation strategies during times of market complexity.

Fidelity's approach is strategic; they've drawn inspiration from the robust risk-adjusted strategies utilized in their target-risk funds, aiming to kickstart their offerings in the Chinese retirement spaceThis strategy also incorporates the group’s global multi-asset allocation frameworks and rigorous risk management principles, tailored for the Chinese settingThanks to inputs from leading figures, like Zheng Renyuan, often heralded as the "father of target date funds," and a well-supported AI-driven team, this product's design integrates cutting-edge techniques in model formation and intelligent risk control.

In a parallel move, major Chinese public mutual funds have similarly begun integrating multi-asset philosophies into their FOF productsNotable among these is the Xinhua Global Active Allocation Fund, which transformed from a closed-end to an open-end structure in November 2024 and has since been rebrandedThis fund made significant advancements in its performance benchmark design by incorporating both the MSCI World Index and the Shanghai Gold Exchange Au99.99 closing price into its performance evaluation criteriaIn addition to domestic assets, the fund is also increasingly including overseas stocks and gold in its allocations, showcasing a commitment to effective risk diversification while capturing opportunities in the global market.

As gold continues to be a dominant theme, funds have ramped up their exposure to this asset classRecent quarterly reports reveal that gold ETFs are becoming a more common investment choice within public mutual fund FOFsFor instance, Xinhua Global Active Allocation increased its holdings in the Huaan Gold ETF by 22.79 million units in the last quarter, raising its market value to 135 million yuan

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Other fund products like Huaan Yingrui and Industrial and Commercial Bank's pension fund have similarly boosted their ETF investments, reflecting an upward trend in gold's allocation weight within FOF products.

The environment surrounding gold investments has seen positive developments in recent times as wellOn February 9, the U.SPresident announced potential tariffs on multiple countries, which, despite historically boosting safe-haven demand for precious metals, is being offset by a stronger dollar and shifting interest ratesAnalysts from Hua'an Fund have highlighted a mixed outlook wherein gold price volatility might rise amidst these complexities.

Looking ahead to 2025, gold is anticipated to be a significant asset class worthy of attentionAnalysts have identified several key drivers likely to influence gold pricing, including recovering actual interest rates, persistent global economic slowdowns, and a renewed focus by central banks on gold purchases to counter inflation and financial risksUltimately, the precious metal's low correlation with other asset classes, coupled with the current low-interest-rate environment, highlights its vital role in diversified portfolios, reaffirming its position amidst rising financial uncertainties.

According to Huatai Securities, short-term drives for gold price increases could stem from inflation and economic uncertainties prompted by changes in U.S. tariff policies, along with market apprehensions regarding equity valuationsPrice forecasts suggest that gold could find significant support at levels between 2,500 to 2,600 USD per ounce in 2025.

Furthermore, considering long-term trends fueled by de-globalization sentiments and waning confidence in U.S. currency, global investment demand for gold, along with net central bank purchases and technological applications, is expected to remain robust while supply stabilizesThis shift in the supply-demand balance could potentially drive upward movements in gold prices.

The recent decision by Chinese insurance funds to pilot gold investments is anticipated to further benefit the gold market

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According to the World Gold Council, global gold supply and demand stood at approximately 4,975 tons in 2024; thus, the inclusion of Chinese insurance capital may yield marginal benefits for gold demand.

Beyond gold, differentiated assets such as REITs have also remained in favor among public mutual FOFsBy the end of 2024, the total market value of REITs held within public mutual FOFs reached approximately 110 million yuan, spread across around 43 funds holding various REITsMajor players like China Europe Fund, Huaxia Fund, and Huitianfu Fund are among those significantly invested in this asset class, indicative of heightened institutional interest.

Research from Zhongjin Company notes substantial holdings among these institutions, with market values reaching millions and capturing significant market sharesHowever, fluctuations were noted in the last quarter, where the percentage of REITs held by mutual funds slightly decreased compared to previous quarters.

On December 3, 2024, the Shanghai Stock Exchange announced plans to expand and diversify the REITs market, which should elevate the scale and scope of this financial product furtherAccording to insights from a leading public fund researcher in Shanghai, the anticipated growth in the REITs market will parallel policies designed to enhance support and diversification in underlying assets, such as consumer goods, logistics, energy, and infrastructure—further solidifying market attractionInvestment opportunities within this space can serve as valuable options for investors looking to navigate the complexities of the evolving market landscape.

Additionally, some FOFs are channeling investments into global markets via QDII funds, with a particular focus on the U.S. market in recent quartersStatistics indicate that multiple FOFs have heavily invested in products like the Wells Fargo Global Bond RMB A and China Asset Hangseng ETFs, reflecting a strategic aim to leverage overseas growth potential amidst a challenging domestic environment.

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