FOF assets are poised to hit a record high. The trend toward diversified asset allocation in public funds has become pronounced, with newly launched products expanding their investment horizons beyond just A-shares and bonds. Assets such as Hong Kong stocks, commodity futures, public REITs, and overseas market products are now emerging as new allocation options. Among the 82 newly launched FOF (fund of funds) products this year, over 40% have incorporated gold indices into their performance benchmarks, while 12 FOFs use major overseas indices as benchmarks. Notably, the proportion of alternative investment funds within FOF assets has reached a historic high.

Previously, FOFs faced stagnation due to poor performance, but this year, many public fund institutions have ramped up efforts in diversified asset allocation, helping FOFs reverse their decline and spark a fundraising boom. In Q4 alone, 13 FOF products raised over RMB 10 billion each. For instance, E Fund Ruyi Ying'an 6-Month Holding raised RMB 5.848 billion in just five days, Huatai-PineBridge Yingtai Stable 3-Month Holding raised RMB 5.577 billion in one day, and Ping An Yingxiang Diversified Allocation 6-Month Holding raised RMB 2.808 billion in four days.

**Expanding FOF Investment Boundaries** Traditionally, public funds concentrated their asset allocations in A-shares and domestic bonds, offering limited choices. However, this landscape is shifting, with Hong Kong stocks, commodity futures, public REITs, and overseas market products now joining the allocation mix.

Wind data shows that alternative investment funds now account for 2.75% of FOF assets, a record high, further underscoring the trend toward diversified allocation.

Among this year’s 82 newly launched FOFs, 34 included gold indices in their performance benchmarks—over 40% of the total. Notably, only 47 out of the 541 FOFs in the broader market previously used gold benchmarks, meaning this year’s new FOFs adopted gold benchmarks at a 70% rate, highlighting gold’s popularity in diversified portfolios. By Q3, nearly 100 FOFs heavily invested in Huaan Gold ETF, making it one of the most favored products.

For overseas assets, FOFs often benchmark against indices like the MSCI World Index, MSCI Developed Markets Index, and S&P 500. Twelve such products have been launched this year. For example, GF Nasdaq 100 ETF and Bosera S&P 500 ETF are among the top holdings of over 10 FOFs. Beyond overseas equity funds, bond funds like Fullgoal Global Bond RMB and Southern Asia USD Bond A RMB are also popular, held by more than 20 FOFs each.

Public REITs are seen as the next hot choice for FOF diversification. By Q3, products like ChinaAMC Beijing Affordable Housing REIT and CICC Anhui Expressway REIT entered the top holdings of Taikang Pension Target Date 2040 3-Year Holding. However, some older FOFs initially excluded REITs from their mandates. Recently, many have amended their contracts to include them—Wind data shows 18 FOFs added public REITs to their investable universe in 2025, with Ping An Yingfu 6-Month Holding also incorporating QDII products for greater flexibility.

Some new FOFs take diversification to the extreme, embedding multiple asset types in their benchmarks. Products like Yinhua Juxiang Diversified Allocation 3-Month Holding and Yongwin Yuanxiang Stable Multi-Asset 90-Day Holding cover A-shares, bonds, Hong Kong stocks, U.S. equities (developed markets), and gold spot indices, spanning nearly all major asset classes.

**Growing Demand for Diversified Allocation** FOFs debuted in September 2017 with six initial products, then surged in 2021 as assets surpassed RMB 100 billion and RMB 200 billion. However, from 2022 to 2024, poor performance and user dissatisfaction led to shrinking scale, hitting a low of RMB 133.15 billion by late 2024.

After three sluggish years, both FOF investors and managers have grown more measured, prioritizing stable absolute returns over short-term high yields.

"With heightened volatility in global equities, weak bond returns, and commodities like gold at historic highs, single-asset investing carries greater risks, making diversified allocation increasingly urgent," said a Shanghai-based FOF manager.

FOFs have regained traction, reversing three years of decline to become a sought-after investment. Year-to-date, new FOF fundraising has exceeded RMB 80 billion, with Q4 alone surpassing RMB 40 billion. Thirteen products raised over RMB 10 billion each, including E Fund Ruyi Ying'an (RMB 5.848 billion in five days), Huatai-PineBridge Yingtai Stable (RMB 5.577 billion in one day), and Ping An Yingxiang Diversified Allocation (RMB 2.808 billion in four days).

Based on Q3 data and Q4 fundraising, total FOF assets could exceed RMB 200 billion, potentially surpassing the 2022 record of RMB 222.3 billion—a remarkable turnaround.

This reflects strong demand for diversified allocation. Among this year’s 82 new FOFs, 25 explicitly include "allocation" in their names, with even more emphasizing the strategy in their mandates.

A 2025 fund advisory whitepaper by Zhong Ou Wealth confirms this trend. Despite an A-share rebound, over 90% of investors prioritize "diversified assets to avoid concentration risk" over short-term gains. Data shows multi-asset strategies with steadier net values retain investors better than volatile equity or overseas strategies, proving the value of diversification.

**Public Funds Double Down on Diversified Allocation** "Diversified assets reduce single-asset volatility’s impact on FOF returns, enhancing risk resilience and expanding income sources," noted an industry expert. This shift in FOF logic has helped rebuild investor trust.

Initially seen as "professional fund pickers," FOFs focused on selecting star managers. But as star managers faltered, the industry redefined FOFs as vehicles for diversified allocation.

A Guangzhou-based FOF manager now prioritizes asset allocation over manager selection, adopting a "fixed-income core + supplementary equities/commodities" approach to smooth volatility and diversify returns.

This mindset is spreading industry-wide. A top public fund’s multi-asset team stated, "No single asset or style can weather economic cycles. Investors often extrapolate past performance, buying at peaks and suffering losses." Their solution: unified risk-budget management and multi-asset product designs.

Many firms now treat diversification as a core focus. China Europe Fund established a multi-asset solutions department, while Xingquan Global Fund rebranded its FOF team as the "Multi-Asset Allocation Department" to build a more flexible research system.

Hua Licheng, head of China Europe Fund’s multi-asset group, said diversified solutions address three pain points: (1) unpredictable returns—by aligning with client needs and risk budgets; (2) excessive volatility—via disciplined, team-based processes; and (3) style drift—through scientific attribution and strategy-driven operations for consistent, explainable returns.