Rejecting "Involution" Fund Companies Shift ETF Strategy Toward Niche Segments with Less Institutional Coverage

According to China Fund News, the enthusiasm for ETF issuance has remained strong this year. However, unlike previous years when many ETFs focused on popular sectors and broad indices, this year many ETFs are actively avoiding homogeneous competition and instead focusing on niche industries and indices with less institutional coverage, including dividend quality, agriculture, animal husbandry, fishery, industrial software, and construction machinery, with many of these ETFs still having only a few products.

According to Yu Li, head of quantitative investment at Xin Yuan Fund, unlike last year when managers densely reported products in popular sectors, this year’s ETF deployment strategies have shown three changes: first, an extension in breadth, with many fund companies choosing to focus on less mainstream areas such as food, grains, agriculture, and fisheries; second, a deeper level of analysis, such as expanding the utility sector from secondary to tertiary industry segments; third, further refinement of investment themes, with some managers selecting more focused themes and indices with higher individual stock weight limits.

Yu Li predicts that this year’s ETF issuance market may present a “barbell” structure of “dividends + technology applications”: on one hand, escalating geopolitical conflicts continue to impact market risk appetite. During periods of volatility, dividend assets’ defensive properties make them a “safe haven” for funds. To meet the demand for certain returns, fund managers are trying to change their approach to dividend-themed ETFs, expanding from a single dividend yield factor to combinations like “dividends + quality” and “dividends + low volatility.”