China’s private fund industry has delivered robust returns in the first five months of 2025, with equity-focused products averaging 7.46% gains according to third-party data. The performance comes amid ongoing market fluctuations that have created abundant structural opportunities across A-shares.
Widespread Positive Performance
Of 2,673 private equity strategy products tracked, 76.66% (2,049 funds) achieved positive returns through May 31. The results show clear divergence between strategy types – quantitative long-only equity products averaged 10.51% returns with 93.3% in positive territory, while discretionary long-only strategies posted 6.84% average gains with 68.65% positive performance.
Large institutional managers demonstrated consistent results, with billion-RMB private funds averaging 6.21% returns. Their quantitative offerings performed particularly well at 11.92% average gains. Separate channel data from over 60 mid-to-large private fund managers showed median returns of 7.47% for discretionary strategies and 8.50%-13.22% for quantitative index-enhanced products tracking small and mid-cap benchmarks.
“The strong performance continues the recovery trend since September 2024,” noted an industry insider, “with both manager and investor confidence steadily rebuilding.”
Supportive Market Conditions
Market participants attribute the strong results to favorable conditions in Chinese equities. Liu Yan, Chairman of Anjue Asset, highlighted policy tailwinds from stimulus measures introduced in late 2024 now translating into corporate earnings improvements. “Valuation repairs across the market have also created abundant opportunities,” Liu added.
Li Chunyu, FOF manager at Rongzhi Investment, pointed to two key opportunity areas for discretionary managers: “The volatile conditions provided stock-picking space, while structural trends in technology, consumer and healthcare sectors rewarded strong research capabilities.” However, he cautioned that rapid style rotations demanded exceptional adaptability from portfolio managers.
Quantitative strategies benefited from three key factors according to a representative from Monetic Investment: heightened volatility creating trading opportunities, small-cap dominance providing alpha sources, and the introduction of new benchmarks like the CSI A500 Index expanding strategy options. The executive also noted artificial intelligence’s growing role in enhancing quantitative models’ resilience.
Challenges and Future Outlook
The quantitative segment faces challenges including strategy homogenization and capacity constraints, prompting firms to develop differentiated, multi-frequency approaches. On the fundraising front, Liu Yan observed a bifurcation – quantitative strategies demonstrating strong appeal while discretionary products face more mixed reception depending on track records.
“The ‘Matthew Effect’ is intensifying,” Liu noted, “with top performers continuing to attract capital while smaller firms must differentiate to compete.” Monetic’s representative expressed optimism about quantitative strategies’ fundraising prospects as market activity improves.
Looking ahead, Li Chunyu anticipates continued structural opportunities supported by favorable policies, though global uncertainties may create headwinds. “Full-year performance could strengthen further,” he concluded, “but much depends on navigating market shifts and maintaining investment excellence.”
Related topics:
