Fund of Funds (FOF) has moved from a niche investment option to center stage this year, experiencing explosive growth. Data from Wind shows that as of April 14, a total of 58 new FOF products have been launched in the market this year, raising over 72.2 billion yuan—an increase of more than 400% compared to the same period last year. Both the number of product launches and the overall fundraising scale have achieved significant growth.
As a core representative of diversified asset allocation, the logic behind FOF allocation is clear: through professional institutions' selection and combination of different types and styles of funds, it achieves diversified asset allocation, effectively hedging risks arising from volatility in single assets, balancing stability and returns, and proving especially suitable for today's volatile and unpredictable market environment.
However, as the number of FOF products continues to expand, how can investors accurately select the right product for their needs? Taking the currently offered Guotai Yingxiang Allocation Six-Month Holding Period FOF (Class A: 026338; Class C: 026339) as an example, we believe three key aspects should be considered.
1. Examine the underlying assets: True diversification requires balanced allocation across multiple dimensions. The core advantage of FOF lies in risk diversification. Achieving this does not simply depend on increasing the number of funds but requires balanced allocation across asset classes, investment styles, and other dimensions.
According to its prospectus, the Guotai Yingxiang FOF uses the following performance benchmark: 70% ChinaBond New Composite Total Value Index, 20% CSI 800 Index, 5% S&P 500 Index, and 5% Shanghai Gold Exchange AU99.99 spot price return. This product demonstrates a strategy focused on stability with diversified enhancements. The portfolio uses bond assets as its foundation, reasonably supplemented with equities, overseas QDII funds, gold, and other risk assets. It aims to broaden return sources while strictly controlling overall portfolio volatility. Through cross-category diversification, it achieves effective risk dispersion and complementary asset performance, smoothing portfolio fluctuations and enhancing long-term resilience.
2. Evaluate the fund manager: Selecting the right professional is crucial in FOF investing. The essence of FOF investment is "fund selection." Unlike traditional equity or bond funds that invest directly in stocks or bonds, FOFs do not directly trade underlying assets. Instead, they build portfolios by selecting high-quality funds with different styles, strategies, and focuses available in the market.
Therefore, the choice of FOF fund manager becomes critical. A skilled FOF manager must possess strong fund research capabilities, sound judgment in major asset classes, strict risk control awareness, and extensive practical experience, often supplemented by quantitative strategies to improve selection accuracy and better manage drawdowns.
Xu Hao, the proposed fund manager for Guotai Yingxiang FOF, holds a Ph.D. in Economics from Nanjing University and professional qualifications including FRM, National First-Class Certified Gold Investment Analyst, and Senior Economist. With a solid theoretical foundation and rigorous risk management mindset, he excels at managing investment risks from macro, meso, and micro perspectives.
Having joined Guotai Fund in May 2010, Xu has served as fund manager, member of the Risk Management Committee, and Head of Quantitative Investment, with extensive experience in tool-based products, financial derivatives, asset allocation, absolute return strategies, and FOF investment, including management of QDII, ETF, and FOF products.
For the Guotai Yingxiang FOF, Xu advocates a balanced approach: "building broad connections" through multi-asset allocation across equities, bonds, gold, and overseas markets to diversify single-asset risks, while "simplifying engagements" by focusing precisely within each asset category—for instance, using quantitative funds for A-share equity exposure with broad-based allocation and rotation, focusing on gold in the commodities sector, emphasizing core U.S. stocks for overseas assets, and prioritizing high-safety bonds like government bonds. This strategy seeks an optimal balance between diversification and focus to achieve steady portfolio growth.
Additionally, the Guotai Yingxiang FOF implements a six-month holding period, balancing liquidity needs with long-term allocation. Each subscription requires a minimum six-month holding period, after which shares can be redeemed at any time. This structure helps prevent investors from frequent trading driven by short-term market fluctuations, encourages long-term investment habits, and avoids overly restrictive lock-up periods, making it suitable for goals like retirement savings and steady wealth appreciation.
3. Review historical products: Meticulous management demonstrated through performance. Taking the Guotai Minze FOF, also managed by Xu Hao, as an example illustrates his management capability in FOF products.
Historical performance shows that since its strategy shift in May 2025, the Class A shares of Guotai Minze FOF have delivered returns of 8.45% over the past six months, 12.72% over the past year, 18.60% since the strategy change, and 18.92% since inception, significantly outperforming the benchmark across all periods and achieving stable excess returns. Notably, the fund's net asset value has reached new highs 77 times since the strategy adjustment, demonstrating strong profitability and stability.
In terms of risk control, the maximum drawdown since the strategy shift was -3.35%, notably better than the peer average of -4.69%. During market adjustments, the fund effectively controlled portfolio volatility, protecting investors' capital and reflecting the manager's steady investment framework and risk management capability.
According to the latest disclosed annual report for 2025, the Guotai Minze FOF exhibited distinct characteristics in its fourth-quarter holdings: balanced and diversified asset allocation covering bonds, equities, gold, QDII, and money market instruments, supplemented by ETF tools for efficient, low-cost market exposure; and allocation to quantitative and enhanced index funds, leveraging the manager's expertise in quantitative stock selection, index enhancement, and precise risk control to reduce single-style concentration and improve overall anti-volatility capacity and return flexibility.
Looking ahead, the fund manager noted in the annual report that the market is transitioning from growth and CSI 300 focus to broader indices like CSI 500 and CSI 1000. However, sharp rallies in thematic and commodity sectors may increase future volatility, suggesting a balanced allocation. Dividend strategies remain suitable for medium- to long-term absolute return objectives, while gold and other commodities may see rising volatility. U.S. and Hong Kong stocks remain relatively weak compared to A-shares, pending clarity on Fed leadership and geopolitical conditions. The current strategy emphasizes discipline around benchmarks and drawdown control without major adjustments, relying on the existing framework. For A-shares, quantitative and enhanced index funds with good drawdown management are preferred, aiming for absolute returns and risk control over relative ranking.
Given current market volatility and frequent sector rotation driven by external factors, scientific asset allocation for risk hedging has become a key consideration for stability-seeking investors. With Xu Hao's deep cross-asset research experience and strong FOF track record, the newly launched Guotai Yingxiang Allocation Six-Month Holding Period FOF (Class A: 026338; Class C: 026339) holds promising potential.
Investors should note that all funds carry risks. FOFs, as mixed fund of funds, generally present higher expected risk and return levels than money market funds, bond funds, or bond FOFs, but lower than equity funds or equity FOFs. Investments in Hong Kong stocks via Stock Connect involve unique risks due to differences in market environment, rules, and regulations. The six-month holding period means shares cannot be redeemed during this time, posing liquidity constraints. Investors should carefully review the fund’s legal documents, understand its risk-return profile, and assess suitability based on individual investment objectives, time horizon, experience, and financial situation.