Global market volatility has intensified, with factors such as one-sided swings in single assets and synchronized movements in stocks and bonds emerging one after another. How to select quality assets and use diversified allocation to smooth out volatility has become a crucial question in current asset allocation.

Faced with this challenge, Yinhua Fund's FOF investment manager Wang Jiapeng offers a straightforward answer: aim to find assets with high cost-effectiveness amidst the cyclical ebb and flow.

Grounded in a cyclical mindset, Wang Jiapeng has long focused on major asset allocation and fund selection, creating multiple products. Currently, the Yinhua Huarui Diversified Allocation Three-Month Holding Hybrid (FOF) (Class A: 027506; Class C: 027507), which he is slated to manage, is now open for subscription. This product aims to provide investors with a diversified allocation solution, seeking to adapt to changing market conditions through dynamic adjustments.

Adopting a Cyclical Mindset, Moving Beyond Static Portfolio Assembly

In Wang Jiapeng's view, all assets follow inherent cyclical rotation patterns, and no single asset can sustain exceptionally high returns indefinitely. Based on this premise, he anchors his strategy in global assets, striving to mitigate the impact of market fluctuations through diversified and balanced allocation while pursuing phased investment opportunities across different categories.

The newly offered Yinhua Huarui Diversified Allocation Three-Month Holding Hybrid (FOF) is a practical application of this philosophy. The fund will focus on investment opportunities in assets such as Chinese bonds, A-shares, Hong Kong stocks, US stocks, and gold, aiming to balance both risk and return within the portfolio.

Of course, diversified allocation is not a set-and-forget strategy. Wang Jiapeng emphasizes that an FOF should not be a static collection of assets but should possess the ability to adjust positions swiftly in response to market conditions. The portfolio needs flexibility to handle different market styles, avoiding significant future drawdowns caused by overfitting to historical data.

Applying this integrated investment framework, Wang Jiapeng has developed several products. For example, his representative product, the Yinhua Huafeng Three-Month Holding Hybrid (FOF), has achieved a return of 4.44% since inception, outperforming its benchmark by 3.85 percentage points over the same period.

A Three-Step Framework for Building the New FOF Product

In terms of specific operations, Wang Jiapeng incorporates quantitative analysis into his cyclical thinking, establishing a core "three-step" investment framework.

Step one involves strategic asset allocation to set the direction. This establishes a long-term, effective performance benchmark as a reference for strategic allocation. For the new Yinhua Huarui Diversified Allocation Three-Month Holding Hybrid (FOF), the benchmark is "75% Chinese bonds + 14% CSI 300 Index + 3% S&P 500 Index + 3% Gold + 5% Cash," aligning with its goal of seeking moderate-to-low volatility, emphasizing risk control, and focusing on the investment experience.

Step two is tactical asset allocation to adjust the rhythm. Using cyclical analysis for dynamic asset allocation helps respond to market volatility and capture phased opportunities. Adhering to the simple logic that "no asset can maintain exceptionally high returns long-term," Wang Jiapeng aims to identify each asset's position within its cycle, overweighting high-value assets in the low phase of their cycle and underweighting low-value assets in the high phase, striving for superior risk-adjusted returns.

Step three is fund selection for enhancement. Subject to the strategic and tactical allocation decisions, quantitative and qualitative models are used to identify high-quality funds. Wang Jiapeng views funds as tools for implementing strategy and tactics. The choice between active funds and passive ETFs depends on which offers a better solution based on the cycle analysis. When selecting active equity funds, he particularly focuses on the long-term win rate of the fund manager's investment framework.

Current Outlook on Major Asset Class Valuations

Based on the cyclical allocation framework and considering current domestic and international macro conditions and market valuations, Wang Jiapeng provides specific insights into the cyclical positioning and relative value of major asset classes.

For A-shares, the market is currently in a phase of structural overheating but with overall valuations still reasonable. Given that the partial-equity fund index (growth style) is at a relatively high level, he currently favors the CSI 300 Index more due to its barbell structure (dividends + AI), offering both offensive and defensive potential.

For US stocks, benefiting from the gradual realization of AI-related profits, the overvaluation seen earlier this year has improved. At this point, their relative value may be more attractive, with potential focus on the AI industry chain and semiconductor sectors.

For Chinese bonds, a neutral view is maintained, employing a short-to-medium duration strategy to capture coupon income.

For gold and US Treasuries, the overall stance is cautious. Gold's significant gains over the past five years have deviated notably from its long-term average. US Treasury yields are currently not far from neutral rates, and with pressures from economic overheating and inflation expectations, patience may be required for an entry opportunity.

Beyond opportunities, Wang Jiapeng highlights two key risks. The first is uncertainty regarding overseas liquidity; one should no longer assume the Federal Reserve will maintain an accommodative stance, as a marginal tightening of liquidity could pressure major asset classes. The second is the impact of geopolitical events, which are often difficult to predict, making proactive adjustments beforehand crucial to avoid reactive moves after such events occur.

Facing a market full of uncertainty, Wang Jiapeng acknowledges, "In the actual investment process, most of the time is ambiguous and directionless. In such times, balanced allocation and patient waiting may be the best choice."

With future market variables still present, returning to the fundamentals of asset allocation and adhering to investment common sense is particularly critical. The Yinhua Huarui Diversified Allocation Three-Month Holding Hybrid (FOF) (Class A: 027506; Class C: 027507) is currently open for subscription, and interested investors may wish to take note.