The investment landscape is witnessing a surge in free cash flow strategy funds, with 25 new products raising nearly RMB 15 billion year-to-date. This growing segment allows investors to target companies with strong cash generation capabilities – a quality increasingly valued in current market conditions.
Rapid Product Expansion
Since the debut free cash flow strategy fund launched in February, the market has seen rapid growth with all 25 existing products being passive index funds tracking five different cash flow indices. The Shanghai-based Bank of Communications Financial Asset Management notes these funds typically select companies with “low debt, high profitability, and strong volatility resistance,” aligning investment returns with long-term value creation.
Several ETFs tracking cash flow indices have recently listed or plan to list, including Ping An’s CSI Free Cash Flow ETF on the Shenzhen Exchange and BOC’s equivalent product set for Shanghai debut. “Free cash flow represents a company’s genuine cash generation ability – the core metric for sustainable shareholder value,” explained a Ping An Fund representative.
Deepening Market Offerings
The product ecosystem continues expanding through both index innovation and fund development:
- New indices launched in February including CSI Hong Kong Free Cash Flow and Hang Seng Stock Connect Free Cash Flow indices
- Multiple funds entering distribution pipeline, including Shanghai Bank’s and Yongying’s upcoming products
- Ping An and Huabao submitting applications for funds tracking the Hang Seng Stock Connect Free Cash Flow Index
Strategic Advantages in Current Climate
Industry experts highlight three key benefits of cash flow strategies:
- Quality filter: Identifies companies with durable competitive advantages and conversion efficiency
- Resilience: Cash-rich firms demonstrate lower financing dependence and stronger crisis management
- Shareholder alignment: Compliments regulatory push for increased dividends under new policies
“In low-rate environments, cash-abundant companies offer both offensive and defensive characteristics,” noted a Ping An spokesperson. “These typically industry-leading firms are well-positioned to enhance investor returns through consistent dividend policies.”
The proliferation of cash flow-focused products reflects growing investor appreciation for fundamental quality metrics amid economic uncertainty, with asset managers rapidly building comprehensive solutions to meet this demand.
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