As markets shift from the intense technology and AI rally into a phase of blurred themes and persistent volatility, fund products that avoid style bets, sector concentration, and momentum chasing are increasingly capturing investor attention. The Hwabao Quantitative Stock Selection Fund (Class A: 017715; Class C: 017716) represents one such actively managed quantitative equity vehicle now in the spotlight.

The fund is co-managed by Xu Linming, General Manager of Hwabao Fund's Quantitative Investment Department and Director of Quantitative Investment, alongside portfolio manager Yu Yinyou. Yu holds a Master's degree in Computer Science from Fudan University and is a CFA charterholder, bringing a decade of securities industry experience and four years of fund management expertise to his role. In Yu's view, quantitative investing leverages scientific probabilistic thinking and computer models to make decisions, effectively eliminating human psychological biases and emotional interference. He emphasizes that quantitative approaches essentially seek certainty within uncertainty through statistical methods, and because these strategies win through probability rather than timing precision, they prioritize steady, long-term outperformance over short-term gains.

Market-Wide Selection with Diversified Holdings

The Hwabao Quantitative Stock Selection Fund, established on February 20, 2023, has delivered a cumulative return of 42.36% since inception through June 30, 2026. During this period, the fund's performance benchmark returned 40.36%, according to the second-quarter 2026 fund report, while annualized volatility stood at 19.07% based on Wind data. Yu explains that while fundamental investing depends on human judgment, quantitative investing converts investment philosophies and research findings into objective mathematical models for decision-making. This data-driven approach gives quantitative strategies an edge in investment breadth, with the fund's strategy covering more than 5,000 A-share stocks across the entire market while maintaining diversified positions and balanced allocation.

As of the second quarter of 2026, none of the fund's top ten holdings exceeded 1.5% of total assets, with positions spread across healthcare, aviation, consumer, information technology, media, and industrial sectors. In the fund's second-quarter report, Yu noted that despite technology trading crowding approaching historical extremes, the fund maintained its multi-strategy model approach, refusing to bet on specific styles or chase market themes. Industry observers point out that diversified holdings have diversified the fund's return sources and improved the portfolio's risk-return profile. The disciplined, systematic investment framework has proven essential to maintaining this broad diversification.

Probability, Cycle, and Balance Thinking for Uncertain Times

When asked about navigating short-term market noise without chasing trends, Yu demonstrates the composure of a seasoned quantitative manager with a long-term perspective. "Stock markets are the most prone to black swan events, making prediction extremely difficult," he says. "Making fewer predictions and focusing more on responses is the best way to find certainty within uncertainty, which is precisely what quantitative investing aims to achieve. Quantitative investing wins through probability; it doesn't compete for being first but rather seeks steady, sustainable returns." Yu believes markets reflect human nature in the short term but follow patterns over the long term. Throughout his management of the fund, he applies probabilistic, cyclical, and balanced thinking to wait for market normalization and rebalancing. He suggests that the appeal of quantitative stock selection lies in finding relatively stable and efficient investment methods regardless of market cycles or volatility, through scientific data analysis, rational decision-making, efficient execution, broad market coverage, and multi-strategy models. He cautions that emotionally driven, undisciplined investment behaviors typically end in failure.

Continuous Evolution of Multi-Strategy Investment Models

Through years of research and practice, Yu has observed that both value and growth strategies experience periods of underperformance as market styles rotate. He identifies the multi-strategy investment model as an effective solution to such uncertainty, and this framework now serves as the fund's primary investment approach. "Our current multi-strategy model comprises five major sub-strategies: value, growth, high quality, turnaround, and trading. Each category is roughly equal-weighted with monthly rebalancing, and each contains about five sub-strategies, totaling roughly 25 sub-strategies," Yu explains. "Through our multi-strategy approach and ongoing development and reserve of new strategies, we aim to outperform across all market environments."

Yu has embedded traditional multi-factor stock selection models within these five strategies to better generate excess returns. Each sub-strategy incorporates approximately ten factors, including alpha factors, fundamental factors, and event-driven factors. The quantitative investment team at Hwabao Fund has invested considerable effort into factor, strategy, and model research, maintaining continuous and dynamic iteration of the multi-strategy framework. Yu advocates Bayesian thinking, viewing it not merely as a mathematical tool but as an investment philosophy of "acknowledging ignorance and pursuing continuous evolution." This philosophy drives his emphasis on factor innovation and model refinement to adapt to increasingly complex market conditions.

Hwabao Fund has maintained a long-standing commitment to quantitative investing, having launched its first quantitative hedging public fund product in 2014. The quantitative investment department currently focuses on index enhancement, quantitative hedging, active quantitative strategies, and fixed income plus approaches. The team's four portfolio managers combine extensive experience with strong theoretical foundations, with educational backgrounds spanning mathematics, statistics, computer science, and finance. The group maintains systematic tracking across macroeconomic analysis, individual stock discovery, arbitrage opportunities, technical timing, event studies, and sector rotation, accumulating diverse product investment expertise.

Important Notices

Market volatility may remain elevated in the near term, and short-term fluctuations do not indicate future performance. Investors should carefully consider their capital positions and risk tolerance, maintaining prudent position sizing and risk management. For the Hwabao Quantitative Stock Selection Fund Class A shares, subscription fees are 1.50% for amounts below 1 million yuan, 1.00% for 1-2 million yuan, 0.50% for 2-5 million yuan, and 1,000 yuan per transaction for amounts above 5 million yuan. Redemption fees range from 1.50% within 7 days, 0.75% for 7-30 days, 0.50% for 30-180 days, and 0.00% beyond 180 days. No sales service fee applies to Class A shares. Class C shares carry no subscription fee, with redemption fees of 1.50% within 7 days, 0.50% for 7-30 days, and 0.00% beyond 30 days, plus an annual sales service fee of 0.40%.

Risk Disclosure

The fund was established on February 20, 2023, with a performance benchmark comprising 80% CSI 500 Index returns and 20% CSI Composite Bond Index returns. Annual net value growth rates versus benchmark returns for 2024-2025 were 11.53% versus 6.63% and 32.36% versus 24.24%, respectively, with annualized volatility of 26.20% and 14.59% for those years. Yu currently also manages several other funds including the STAR Market Enhanced ETF, its feeder fund, the CSI A500 Index Enhanced Fund, and the Hwabao Value Discovery Fund. The STAR Market Enhanced ETF launched in August 2026, while the feeder fund and CSI A500 Index Enhanced Fund began in September 2025 and June 2025 respectively, none yet completing a full investment year. The Value Discovery Fund uses the CSI 800 Value Index (80%) and Shanghai Treasury Bond Index (20%) as its benchmark, delivering annual returns of 10.11%, -5.78%, -13.37%, 16.23%, and 13.06% from 2021-2025 against benchmark returns of -0.53%, -9.75%, -1.74%, 19.95%, and 6.70%, with annualized volatility of 16.24%, 20.42%, 14.99%, 26.14%, and 14.64% respectively.

The funds are issued and managed by Hwabao Fund, with distributors not assuming responsibility for investment performance or redemption obligations. Investors should carefully review the fund contract, prospectus, and product summary to understand risk-return characteristics and select products matching their risk tolerance. Hwabao Fund rates the Quantitative Stock Selection Fund as R3-medium risk, suitable for balanced (C3) and above investors, while the Quantitative Hedging Fund carries an R2-low-to-medium risk rating for stable (C2) and above investors. Past performance does not guarantee future results, and investment requires caution. Investors should consult appropriate suitability opinions from sales institutions and understand that risk ratings may vary across different evaluation frameworks.