Increasing pressure in the equity market: "Fixed Income+" initiates defensive counterattack strategy

Ask AI · How do equity market fluctuations trigger defensive “fixed-income plus” funds to protect and counterattack?

“Fixed-income plus” funds that pursue stable returns have recently continued to face pullback pressures caused by market volatility. In particular, the “deep squat” in the equity market in recent days has made the “fixed-income plus” funds’ performance this year far from satisfactory. Chinese Securities Journal reporters learned from industry insiders that recently, “fixed-income plus” funds have indeed been facing some redemption pressure on the liability side, and some capital pursuing absolute returns has chosen to exit. Some fund managers have already made arrangements in advance—such as reserving room for liquidity and adjusting positions in response. At the same time, investment management teams have generally shifted toward a “defense and counterattack” approach, to guard against volatility surges across various assets.

When the equity environment was more favorable, “fixed-income plus” funds absorbed large amounts of capital with relatively low risk appetite, driving rapid scale expansion. But with an increase in the magnitude of equity market fluctuations, the old model of relying on one-way equity gains to generate returns will be hard to sustain. Industry institutions believe fund managers should not expand equity exposure by following market styles, and should instead keep risk control as the top priority at all times. Meanwhile, they should avoid irrational subscriptions and redemptions triggered by short-term volatility through ongoing investor companionship and communication. In addition, they should be alert to strategy crowding risk under homogeneous industry competition, deepen investment research, and improve the ability to allocate across major asset classes, ensuring that products can operate smoothly under different market conditions.

“Fixed-income plus” holding experience leaves much to be desired

In recent days, wide-range volatility in the equity market has amplified the synchronized swings of “fixed-income plus” funds that use fixed-income assets as a baseline and equity assets to thicken returns (this refers only to statistics for debt+ hybrid funds, hybrid bond funds—Type 1, and hybrid bond funds—Type 2).

Especially after the A-shares market saw a sharp correction on March 23, many “fixed-income plus” funds that hold equities experienced a rapid downward shift in their return curves, nearly wiping out the cumulative returns so far this year. As of March 23, the average return of “fixed-income plus” funds since the start of the year was only 0.08%.

That day, some high-volatility “fixed-income plus” funds with relatively high equity positions showed obvious drawdowns. For example, in the debt-biased hybrid fund Dongfang Minfeng Return Win An A, the net asset value fell by more than 3% on the day, with a cumulative drawdown of more than 10% since the start of the year. According to disclosures in the 2025 annual report, the fund’s equity position and convertible bond position at the end of 2025 were both as high as over 40%.

Although the equity market began to rebound on March 24, the returns of multiple “fixed-income plus” funds with scales in the hundreds of billions of yuan were still negative this year. As of March 24, the average return of “fixed-income plus” funds with scales in the hundreds of billions since the start of the year was 0.58%, with a difference of more than 5 percentage points between the top and bottom performers.

Regarding the performance of “fixed-income plus” funds in recent days, some fund managers explained that in the bond market, recent upheavals overseas have increased economic uncertainty. At the same time, the Federal Reserve announced that it would keep interest rates unchanged, and liquidity has been somewhat tightened, leading to a corresponding adjustment in the bond market. In the stock market, geopolitical conflicts have impacted equities, and with A-shares currently in a consolidation pattern, structural differentiation has intensified, causing sectors that previously surged to pull back.

Addressing redemptions and strengthening defense

It is worth noting that the ongoing volatility in recent days has made some holders of “fixed-income plus” funds, who seek stable returns, feel a bit unable to sit still.

Chinese Securities Journal reporters learned from industry insiders that recently, “fixed-income plus” funds have faced some redemption pressure on the liability side. Some funds pursuing absolute returns have chosen to withdraw, resulting in a small amount of redemption on a short-term, wave-by-wave basis. This is already reflected to some extent in the pricing of relatively high-valuation convertible bond-type assets. However, overall performance still remains within expectations, and mild fluctuations in capital have not caused material impact.

According to statistics from Huachuang Securities’ fixed-income team, since March 4, “fixed-income plus” funds have experienced continuous redemptions. Compared with the redemptions driven by equity-asset declines in November 2025 and January 2026, the redemption pressure in this round is clearly stronger.

To cope with redemption pressure, some “fixed-income plus” fund managers revealed that they have already made arrangements in advance—such as reserving liquidity capacity and adjusting position exposures—to guard against the impact of concentrated redemptions on fund net asset values. In addition, the investment management side has generally shifted to a “defense and counterattack” mindset, aiming to prevent volatility across various assets from spiking, and to be wary of risks related to long-term exposure of high Sharpe ratio assets.

Bank of China Asset Management introduced that in the credit “core holdings” portion, the team applies strict standards to eliminate tail risks via a one-vote veto. The “+” portion strictly controls actual position exposure relative to the benchmark and the product’s style positioning, reducing any excess exposure. It strengthens management of industry concentration and single-stock concentration, striving to hold industry leading companies as the core positions—those whose valuation still offers a certain safety margin and whose earnings growth rates align well with performance targets. At the same time, it monitors correlations among underlying assets and focuses on “making money from enterprise value growth” and “making money from time.”

A high-volatility environment reduces path dependence

Looking back, the reason “fixed-income plus” funds—led by secondary bond funds—rapidly exploded in growth and expanded quickly in 2025 is inseparable from the support from equity market performance. In particular, for mid-volatility “fixed-income plus” funds with equity allocations of 10%-20%, investors broadly favored them over the past year, making them a new choice for many stable investors.

As of the end of 2025, the fund sizes of Yongying Steady Enhanced, Invesco Great Wall Jingsheng Double Dividends, and E Fund Enhanced Return all exceeded 40 billion yuan. The fund sizes of Invesco Great Wall Jingyi Dual Benefits, E Fund Steady Return, China Europe Fengli, Invesco Great Wall Jingyi Fengli, and E Fund Yuxiang Return all exceeded 30 billion yuan. In these “fixed-income plus” funds, their equity positions at the end of 2025 were all in the 10%-20% range. Among them, Invesco Great Wall Jingyi Fengli A’s return in 2025 was as high as 25%; Yongying Steady Enhanced A and Invesco Great Wall Jingsheng Double Dividends A also had returns of over 10%.

Industry participants believe that with the earlier equity environment being relatively favorable, investors generally formed optimistic expectations for “fixed-income plus” funds. They absorbed a large amount of capital whose risk appetite was originally not that high, driving the “fixed-income plus” funds’ scale to expand quickly. However, as volatility in the equity market has intensified, the investment inertia that worked under favorable conditions has faced serious challenges. Some institutions suggest that the increase in the magnitude of market volatility may become the norm. The old model of relying on one-way equity upside for returns may be hard to continue. Once a product’s net value volatility exceeds expectations, it can easily trigger concentrated redemptions. Not only do investors need to guard against risks arising from mismatches between amplified asset volatility and fragile liability expectations, but they also need to reduce path dependence on staged success—staying alert to the habits and implicit risks built up during tailwind periods for the portfolio.

In the view of industry players, fund managers should not only be wary of imbalances between scale and capability, and avoid blind expansion that distorts strategy implementation, but also uphold the core positioning of “stability first.” They should not expand equity exposure by shifting with market styles, and should always place risk control at the top priority. At the same time, they should also guard against risks of mismatched investor expectations. Through ongoing investor companionship and communication, they should reinforce holders’ understanding that “fixed-income plus” funds have “return elasticity and risk boundaries,” and avoid irrational subscriptions and redemptions triggered by short-term volatility. In addition, they should be alert to strategy crowding risk under homogeneous industry competition. By deepening investment research and optimizing the ability to allocate across major asset classes, they can build a solid barrier of differentiated competition, ensuring that products can operate smoothly under different market environments.

For the key points in managing subsequent “fixed-income plus” funds, Yongying Fund stated that first, they will emphasize monitoring volatility and appropriately reduce risk exposure based on changes in the portfolio’s volatility, without overly relying on index performance. Second, they will leverage the hedging and complementary characteristics among assets to effectively broaden the portfolio’s effective opportunity set and optimize the risk-return ratio. Third, they will place greater emphasis on structural opportunities—such as core energy security, new-energy substitution, and oversold mispriced products—rather than pursuing consistent long-only positions. Fourth, they will reserve liquidity capacity in advance to avoid passive selling when redemption pressure is concentrated.