Fund turnover rate data revealed! Does frequent trading lead to high returns or losses?

Against the backdrop of last year’s technology stocks serving as the main storyline, detailed hot themes have continued to emerge endlessly. Concepts such as cloud computing, humanoid robots, optical modules, and PCB have traded the stage one after another. Therefore, some fund managers have also refused to “lie flat,” hoping to capture investment directions with better “value for money” by making relatively flexible portfolio rotations. In terms of data, this is reflected in stock turnover rate (also known as “turnover ratio,” or “churn rate”).

It is not hard to see from net asset value that a higher turnover ratio—if positioned appropriately—can become an important driver for top-performing funds and even “double-return funds.” However, some funds have also lost their way in terms of when to enter or exit: not only did their rotation direction miss the main storyline, but the friction costs generated by their trading also eroded their fund net asset values to some extent.

Top-performing funds have different turnover ratios

As fund annual report data have been fully disclosed, their 2025 portfolio turnover ratio figures have come out, and the moves of some funds that led performance are drawing close attention from the market. Multiple equity-biased products moved back and forth during last year’s “tech bull” market, timed the main storyline correctly, and achieved impressive gains. In data terms, this is reflected in the stock turnover ratios that have kept setting new highs in recent years (also known as “turnover ratio,” or “churn rate”).

Taking one fund that gained more than two times as an example: alongside this high return was its high-frequency rotation in areas such as AI compute power and optical modules. According to annual report data, the fund’s stock turnover ratio was about 6.15 times, indicating that amid frequent switching of the technology main storyline last year, the fund manager was able to precisely take profits at periodic high points and switch to more cost-effective sub-sectors.

As of the end of the first quarter of last year, this fund’s top holdings included cloud-computing-themed stocks such as Aofei Data and Dahwei Technology, as well as Alibaba, among others, and it achieved nearly double-digit returns. But by the end of the second quarter, the fund manager said, “Cloud computing is a sector with a long-term logic, but after the initial accumulation of a certain amount of gains, adjustments and volatility are inevitable in the future.” Then it replaced all of its top ten holdings; its focus shifted to high-beta stocks such as optical communications and PCB (printed circuit boards), represented by “Yi Zhongtian,” and in the following third and fourth quarters it continued to make certain adjustments to its top holdings.

Caitong Opportunity Fund’s leader has a relatively low turnover ratio. Benefiting from its long-term hold of “Yi Zhongtian” that began back in 2023, the fund did not need too many portfolio rotation moves during last year’s AI upsurge in order to calmly “enjoy” the heat in the secondary market.

In addition, a certain product under a South China-based medium-sized public fund company had an annual turnover ratio exceeding 10 times. In its first quarter last year, the fund replaced all of its top ten holdings. As of the end of the first quarter, the fund was still mainly focused on stocks such as Feilihua and Mengsheng Electronic, which are not highly related to artificial intelligence. In the second quarter, it again changed nine of its top ten holdings. In the third and fourth quarters, it focused its allocation on AI; for the full year, it also achieved a return rate of 148%.

There are also more than 100 equity-biased funds with annual turnover ratios above 10 times, and among them, the turnover ratios of products using quantitative strategies are even as high as dozens of times.

A fund manager in North China said that for ordinary active equity products, a higher turnover ratio means the fund manager’s operations are more frequent. They may, based on short-term market fluctuations, actively adjust their investment portfolio in an attempt to capture more short-term investment opportunities. Funds like this typically place greater emphasis on the market’s short-term trend and seek spread profits through frequent buying and selling.

Turnover rates overall were high last year

Based on the panoramic statistics on 2025 annual report data for public funds from Tianxiang Investment Consulting, it is not hard to see that the rate at which public funds rotated their portfolios has moved out of the low range of the past three years and shows a clear rebound trend.

Data show that in 2025, the average turnover ratio across all open-ended funds was 3.13 times. This figure was only 2.24 times in 2023, and though it was raised in 2024, it was still just 2.39 times. If the time horizon is extended, compared with the turnover ratios in 2021 and 2022, it is even more leading. At that time, the market was in a prolonged low-level range-bound phase with low trading activity, reflecting that in a structurally very strong market, the cost of “holding stocks without moving” has been rising, and the initiative of active management has been strengthened.

In addition, according to Tianxiang Investment Consulting data, the portfolio turnover ratio of holdings in the second half of last year at 2.75 times was significantly higher than the 2.04 times in the first half. A research and investment director at a fund company in South China analyzed that this increase in trading volume closely matched the divergence in market expectations for AI implementation in the second half of last year and the intense volatility of AI compute-power leaders. When market consensus evolved from “seeking direction” to “violent turbulence,” the surge in turnover ratio essentially reflects fund managers using volatility to rebalance positions—a direct manifestation of the intensifying race for market efficiency.

This director also said that in a year like 2025, which tests staying power and valuation anchor points, frequent changes in holdings often indicate that the fund manager does not have a stable grasp of the logic of the underlying assets. Some fund managers may only rely on sensing the trading screen to operate, which is, in essence, speculation rather than investment.

High turnover ratios also erode returns

“However, high turnover ratios come with some risks as well. Frequent trading may increase transaction costs, such as commissions and stamp duties; these costs ultimately erode fund returns. Moreover, short-term market volatility is highly uncertain—if you make a wrong judgment, frequent operations may actually lead to losses.” The aforementioned fund manager in North China said.

It is also worth noting that, just as several top-performing funds achieved excellent full-year net asset values through decisive portfolio rotations, some other products also lost their timing in bull markets. Even with high turnover, they were unable to “grow stronger” into a larger product.

For example, a consumer-themed fund under a public fund company in East China: by the end of last year, its scale was only RMB 17 million. And judging from quarterly report data, its scale fluctuated within the range of RMB 10 million to RMB 17 million throughout the year.

According to the annual report data recently disclosed, the fund’s transaction value for buying and selling stocks exceeded RMB 1.1 billion, which means the fund’s turnover ratio for the full year was above 55 times. This implies that last year it paid brokers commissions of only about RMB 500k, which undoubtedly represents a significant erosion of the fund’s assets. In addition, due to missing the main storyline caused by its heavy holdings in the consumer sector, the fund’s full-year return rate was negative.

Similar situations also occur in some smaller funds. These funds’ sizes are mostly below RMB 500k. Analysts have pointed out that some “mini” funds, in order to survive, tend to seek short-term rankings through extreme turnover and style-rotation games.

“If a fund manager adopts a prudent low-turnover strategy, it’s difficult to stand out among nearly ten thousand products across the entire market. To attract capital inflows, they must chase extreme short-term rankings. In addition, it cannot be ruled out that a very small number of mini funds, through high-frequency trading, leave transaction commissions in certain broker channels as consideration for the broker’s help with distribution.” A fund observer said.

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责任编辑：宋雅芳