China Merchants Fund reached a management scale of 1,015.95 billion yuan by the end of the second quarter, becoming the first bank-owned public fund to cross the trillion-yuan threshold. However, the milestone was quickly overshadowed by a sharp monthly loss of 51.54% in its Zhaoshang Core Equipment Hybrid A fund managed by Feng Fuzhang, a noted defense sector analyst, marking the worst performance among all actively managed funds in July. This incident has intensified concerns about the firm's investment research team, which has been losing senior talent.

Veteran fund managers are diverging—some leaving while others reduce their roles. In August, Hou Hao, known as the "Baijiu King" after his Zhaoshang CSI Baijiu Index A fund, ceased managing the Zhaoshang SSE STAR 50 Composite ETF Link A, having already stepped down from several funds since November. Meanwhile, Wang Jing, a "double-ten" fund manager with over a decade of experience and annualized returns above 10%, has reduced her portfolio to just one actively managed fund, Zhaoshang Blue Chip Selection, after poor performance. Li Yin, a versatile equity and bond manager, left the company in April and is reported to have joined GF Fund, following other key departures like Jia Chengdong, Zhai Xiangdong, and Ma Long.

Feng Fuzhang's aggressive portfolio shift from defense to AI-related stocks in the second quarter initially boosted returns but backfired in July, causing a 51.54% monthly loss for the Zhaoshang Core Equipment Hybrid A fund. The fund's top holding, Yangtze Optical Fibre and Cable, exceeded the 10% NAV limit, while the combined holdings of Kingboard Laminates and Kingboard Chemical surpassed 12%, violating regulatory caps. The lack of intervention from risk control has raised questions about oversight amid the talent drain.

Despite the turmoil, China Merchants Fund's trillion-yuan scale is largely supported by fixed-income products, which account for over 75% of its total assets. However, with net profit declining for three consecutive years—from 18.13 billion yuan in 2022 to 14.38 billion yuan in 2025—and actively managed equity funds shrinking by nearly 80 billion yuan over three quarters, the firm's profitability is under pressure. Its stock investment losses totaled 57.92 billion yuan from 2021 to 2025, and it recorded zero funds with returns exceeding 100% in the first half of this year, despite a tech rally. The new management's "active management + passive index" strategy aims to address these gaps, but filling the talent void remains a critical challenge.