Amid market fluctuations, capital flows quietly beneath the surface. Increase holdings in fixed-income assets to build a stable investment portfolio.

The timing of a potential easing of the Middle East situation remains uncertain, and the sharp fluctuations in oil prices impact the transmission of prices across the global supply chain, affecting all aspects. In a market environment with increasing uncertainties and heightened volatility of risk assets, many funds choose to allocate to high-quality pure bond funds as a “safe haven.” Choice data shows that, as of March 31, the last five trading days saw an inflow of 29.31B yuan into bond ETFs.

Industry insiders point out that after the stock bull market from Q4 2024 to 2025, investors’ asset allocation structures need rebalancing. The market volatility caused by escalating geopolitical conflicts in March has accelerated this process, driving funds into bonds to build more stable and risk-aligned investment portfolios.

Bond Funds Become the “Ballast”

The essence of asset allocation is not about capturing the highest returns every time but about constructing a resilient portfolio capable of withstanding different market environments. Navigating the vast ocean of investments, we need not only a “sail” that can ride the waves but also an “anchor” that can stabilize the ship. Bond assets are precisely this indispensable “anchor” in the portfolio.

The value of this “anchor” becomes even more apparent in markets with increased volatility of risk assets. Observing the performance of different fund types over the past six months reveals that: equity assets have experienced significant fluctuations, while bond assets have remained steady. Choice data shows that as of March 31, 2026, equity products represented by ordinary stock funds and mixed funds with a bias toward stocks generally experienced maximum drawdowns around 13% to 14%. Compared to QDII funds, active A-share equity funds have managed volatility better this year, but their fluctuations have increased noticeably compared to 2024 or 2025.

In contrast, bond funds—whether passive index bond funds or actively managed bond funds (short-term pure bond funds, passive index bond funds)—have had average maximum drawdowns within 0.3%. Moreover, compared to the same period in 2025, these maximum drawdowns have decreased significantly.

Table: Average Maximum Drawdowns of Major Fund Types Over the Past 6 Months

Data source: Choice, product classification based on Eastmoney’s third-level fund categories, sorted from smallest to largest “average maximum drawdown over the past 6 months as of March 31, 2026.” Color blocks indicate the size of the drawdown for the same fund type in different years; red indicates the period with the smallest maximum drawdown, green indicates the largest. Past data does not predict future performance. Investment in funds carries risks.

Bond ETFs See Increased Capital Allocation Amid Market Volatility

In an environment of heightened market fluctuations, both institutional and individual investors’ risk appetite has declined, leading to increased allocation to bonds to hedge against uncertainties. As seen in the ETF market, which can quickly respond to capital flows, some funds are flowing into bond ETFs.

Choice data shows that bond ETFs attracted an additional 32.84B yuan in March, with 3.2835 billion yuan added in the last five trading days of March. Regarding product types, most of the capital was allocated to Sci-Tech Innovation Bond ETFs and Credit Bond ETFs, such as GF Sci-Tech Innovation Bond ETF and GF Credit Bond ETF, which received 1.37 billion yuan and 490 million yuan respectively.

For investors, bond ETFs are a transparent, capital-efficient, and cost-effective allocation tool. Especially for Sci-Tech Innovation Bond ETFs and Credit Bond ETFs, taking GF Sci-Tech Innovation Bond ETF (511120.SH) and GF Credit Bond ETF (159397.SZ) as examples, the former tracks the SSE AAA-rated Sci-Tech Innovation Corporate Bond Index, which requires bonds to have an AAA public rating and also introduces an “implied rating of AA+ or above” as a market standard; the latter tracks the Shenzhen Benchmark Market-Making Credit Bond Index, characterized by high-grade bonds, medium to short durations, good liquidity, and low credit risk. Beyond high-quality underlying assets, these two types of bond ETFs can also engage in general pledge repo transactions.

In terms of performance, both funds have performed well over the past six months. Choice data shows that as of March 31, the GF Credit Bond ETF and GF Sci-Tech Innovation Bond ETF gained 1.86% and 1.40% respectively in the on-market segment over six months, with maximum net value drawdowns of 0.23% and 0.30%.

What Is the Risk-Return Profile of Actively Managed Bond Funds?

Compared to bond index funds with obvious capital flows, the performance of actively managed bond funds also attracts attention. Relying on the professional capabilities of fund managers and their research teams, actively managed bond funds seek to generate returns exceeding the market average through active operations in credit research, duration adjustments, leverage, and individual bond selection, all while controlling risk. This approach appeals to investors seeking lower volatility or higher excess returns.

Some products with proven market resilience and stable styles have gained investor interest. For example, in short-term bond funds, as of March 31, GF Jingxing Short-Term Bond Fund (A: 0006998; C: 0006999; E: 0021897) and GF Zhaocai Short-Term Bond Fund (A: 0006672; C: 0006673; E: 0010324) had maximum drawdowns over the past six months below 1 basis point, with maximum drawdowns over the past year within 5 basis points. According to Galaxy Securities data, GF Jingxing Short-Term Bond Fund A’s maximum drawdown over the past year was 0.02%, ranking 6th among 169 similar funds (short-term pure debt bond funds, A class). Its return over the same period was 1.71%.

For medium- to long-term bond funds, although their drawdowns are less controlled than short-term funds, their returns are significantly higher over the same period. For example, as of March 31, GF Jifu Pure Bond Fund (A: 0003039; C: 0003040) had a maximum drawdown within 0.5% over the past year, with a return of 3.84%, ranking in the top 1% among similar funds (long-term pure debt bond funds). GF Jingning Pure Bond Fund (A: 0000037; C: 1344949) and GF Jingyu Pure Bond Fund (A: 0021552; C: 0021553) had maximum drawdowns within 0.8%, with A shares experiencing 0.53% and 0.71% drawdowns respectively, and returns of 2.82% and 2.93% over the same period.

Source: GF Fund

Risk reminder: Funds are subject to risks; investments should be made cautiously.