The high elasticity of the convertible bond market, driven by both technology and cyclical sectors, is becoming an engine for amplifying the return potential of convertible bond funds.

As of January 30, Southern Changyuan Convertible Bond Fund A achieved a cumulative return of 63.74% over the past year, with its year-to-date return for 2026 once exceeding 18%, significantly outperforming the CSI Convertible Bond Index. In a recent interview, Liu Wenliang detailed the allocation logic and industrial cycle analysis framework behind the fund's performance, while also sharing his investment strategy for convertible bond funds in 2026. His investment system, which centers on industrial cycles and integrates digital tools with diversified asset allocation, has become key to capturing opportunities in the convertible bond sector.

Performance breakthroughs stem from evolving insights. Regarding the drivers of his fund's performance, Liu Wenliang stated that the core returns of convertible bond funds come from the dual support of technology growth and cyclical sectors, with technology growth driven by major industrial cycles being a long-term focus. According to past fund reports, themes such as the AI industrial cycle and trends in unmanned and intelligent military technology have been core contributors to portfolio returns. The cyclical sector focuses on three industries: non-ferrous metals, machinery, and chemicals. The logic is that these sectors can capture investment opportunities when downstream demand strengthens, whether from the development of AI or profit cycle changes driven by reasonable price increases.

The allocation strategies of Southern Changyuan and another fund he manages, Southern Guangli, differ due to their distinct mandates. As a convertible bond fund, Southern Changyuan focuses more on convertible bond investors, employing a "four building blocks" portfolio strategy: deeply挖掘 high-quality equity-like convertible bonds for medium to long-term holding, diversifying into balanced convertible bonds with attractive valuations, capturing tactical opportunities in large-cap convertible bonds from sectors like finance and utilities, and buying undervalued, oversold bond-like convertible bonds. The allocation of these blocks is adjusted based on market conditions—increasing exposure to equity-like and balanced convertible bonds during offensive phases, and raising allocations to large-cap tactical and bond-like convertible bonds during defensive phases.

As a multi-asset "fixed income plus" product, Southern Guangli has slightly lower sharpness and elasticity compared to Southern Changyuan. Its offensive and defensive adjustments are primarily made through two methods: dynamically adjusting convertible bond allocation and modifying the portfolio's bond duration. Liu emphasized that the performance of both products relies on the support of Southern Fund's investment research team and digital platforms, as well as continuous refinement of the investment framework. "Calm reflection and enhancing industry understanding are more important than mere research visits," he noted.

In Liu's investment system, industrial cycles are central to market analysis, while security selection hinges on managing both景气度 and valuation. He described his style as偏向景气成长, with decision-making primarily focusing on the first and second derivatives of景气度—the trend and rate of change in sector and individual stock景气度 are key metrics. He holds firmly during periods of accelerating景气度 and reduces exposure promptly when the trend deteriorates.

Valuation and market sentiment are another critical dimension of security selection. Southern Fund uses its digital platform, the "Euler System," to construct sentiment indicators for 30 industries, measuring sector sentiment through metrics like turnover rate and trading volume share, enabling "reducing exposure at high sentiment and building positions at low sentiment."

Regarding the core moat of the "high elasticity + high concentration" portfolio model, Liu summarized it into three aspects: first, diligence, involving substantial time and effort in research and portfolio management; second, value creation through research, particularly the deep research capabilities of the investment team—Southern Fund has established a cross-departmental convertible bond research group to conduct in-depth analysis of key securities, where research depth determines the ability to hold crucial positions during volatility; third, tool support from digital platforms, with signals from the convertible bond module for timing, sector liquidity, and quantitative security selection already integrated into daily investment decisions.

Liu's 14 years of industry experience have also cultivated his capabilities in diversified investing. As a fund manager developed within Southern Fund's fixed income system, he possesses research backgrounds in convertible bonds, credit bonds, and macro rates, achieving deep integration of top-down macro judgment and bottom-up stock selection. He stated that credit analysis and equity analysis are two sides of the same coin—the credit perspective helps avoid financial risks, while the equity perspective aids in understanding industrial logic, with the two mutually reinforcing to capture cross-sector convertible bond opportunities.

For the 2026 market, Liu remains generally optimistic, believing that equity and convertible bond markets offer significant opportunities, while the pure bond market may experience more volatility.

In terms of timing, Liu anticipates that after a strong start in the first quarter, the market may see monthly or quarterly fluctuations, with more opportunities emerging in the second half. Portfolio operations will adhere to an "offense + phased defense" strategy, aiming to navigate volatility and smooth returns through dynamic adjustments.

Sector-wise, technology growth remains the core theme, with Liu particularly optimistic about synergistic opportunities across the AI industry chain. He noted that upstream AI sectors are already seeing price increases, but it's crucial to distinguish between supply-driven and demand-driven factors. The commercialization of downstream AI applications in 2026 will be key—"the AI industry needs a closed商业 loop; profitability downstream is essential to sustain the entire chain.超预期 penetration of downstream applications will lay the foundation for future景气度."

For the convertible bond market, Liu advised investors to adjust return expectations: high returns in 2025 were driven by valuation recovery during the bear-to-bull transition, whereas in 2026, valuation contributions will diminish significantly, with returns relying more on equity market performance.

For general investors, Liu indicated that convertible bond funds are unlikely to replicate 2025's high returns in 2026, and investors should maintain rational expectations. However, convertible bonds and "fixed income plus" products still hold significant advantages in a low-interest-rate environment: convertible bonds offer both bond-like protection and equity-like elasticity, while "fixed income plus" products balance risk and return through a "bond foundation + return-enhancing assets" model, making them important options for household asset allocation.

In risk management, Liu stated that in scenarios like global liquidity tightening or disappointing industrial policies, the fund would adjust asset allocation, increase defensive assets, and capitalize on tactical opportunities in large-cap convertible bonds to reduce portfolio volatility while preserving return elasticity.始终 guided by industrial cycles, the strategy aims to capture structural opportunities through a balance of景气度 and valuation.

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