Public Fund Mid-Year Review: Record Performance, Surge in New Equity Issuance

Author: Liu Yuyang, Wang Siyi

With the first half of the year concluding, the mid-year performance report for public funds has been officially released. Overall, the public fund market has shown notable structural trends, with a significant gap between the best and worst-performing funds. Funds heavily invested in the tech sector have led the market in returns. Data shows that in the first half of the year, 199 actively managed equity funds achieved doubled returns (based on main share classes, excluding QDII funds, same below). Among them, Founder Fubon Core Advantage Hybrid A, which led the market, set a new industry record with an 183.67% return.

However, while equity gains were concentrated, some funds heavily allocated to the consumer sector experienced significant net asset value (NAV) declines. The gap between the top and bottom performers among actively managed equity funds in the first half reached 217.95 percentage points, highlighting an increasingly polarized return structure. Meanwhile, the total issuance of new public funds expanded, with a sharp change in structure. Equity products saw a surge in issuance interest, while bond fund issuance halved. FOFs experienced explosive growth, and industry dividend payouts fell year-over-year, signaling a new round of structural reshaping in the public fund industry.

** Returns as High as 183.67% **

Driven by the tech boom, funds that doubled returns emerged like bamboo shoots after a spring rain in the first half of 2026. According to Wind data, 199 actively managed equity funds achieved doubled returns as of the end of the first half. Among the top performers, the top 10 actively managed equity funds by NAV growth rate all exceeded 157%. They are: Founder Fubon Core Advantage Hybrid A, Caitong Multi-Strategy Fuxin Hybrid, Dongfang Huixin Hybrid A, Dongfang Artificial Intelligence Theme Hybrid A, Huian Trend Power Stock A, Caitong Jiangxin Youxuan One-Year Holding Hybrid A, Dongfang Alpha Technology Smart Select Hybrid A, Dongwu Value Growth Dual Power Hybrid A, Yinhua Integrated Circuit Hybrid A, and Caitong Jingqi Zhenxuan One-Year Holding Hybrid A.

Notably, Founder Fubon Core Advantage Hybrid A, managed by Wu Hao, achieved a first-half return of 183.67%, ranking first among all actively managed equity funds, leading the second-place Caitong Multi-Strategy Fuxin Hybrid by 10.73 percentage points. It also broke the previous best half-year record of 160.31% set by Fullgoal Low-Carbon Environmental Protection Hybrid in the first half of 2015.

Expanding the view to the past year, five products from Caitong Fund topped the list. Among them, Caitong Multi-Strategy Fuxin Hybrid led the market with a return of 501.19%. Additionally, Caitong Jiangxin Youxuan One-Year Holding Hybrid A, Caitong Jingqi Zhenxuan One-Year Holding Hybrid A, Caitong Growth Youxuan Hybrid A, and Caitong Integrated Circuit Industry Stock A all achieved returns exceeding 430%.

However, amid the extreme profit-making effect of the tech sector, the "Matthew effect" in the public fund industry became more pronounced. On one hand, tech sector fund returns repeatedly hit new highs; on the other hand, funds positioned in the consumer sector continued to face pressure, widening the gap between the best and worst performers during the year.

According to data, the worst-performing actively managed equity fund in the first half—Xinao Bojian Growth One-Year Open Hybrid A—saw a NAV decline of 34.28%. This means the gap between the top and bottom performers among actively managed equity funds in the first half of 2026 reached 217.95 percentage points, vividly illustrating the extreme divergence in this year's public fund "mid-term exam" results.

Regarding this phenomenon, Bai Wenxi, Vice Chairman of the China Enterprise Capital Alliance, stated, "Behind this extreme divergence, the tech sector's suction effect is the core reason. A gap of over 210 percentage points between top and bottom means: industry allocation differences are magnified infinitely, stock-picking alpha gives way to sector beta; the difficulty for fund investors to 'choose funds' surges sharply, and the return gap between betting on the right sector and the wrong sector is hard to bridge; some fund managers may have a gambling mindset of 'betting on sectors,' deviating from the essence of fiduciary duty."

** Equity Products Account for Nearly 60% of New Issuance **

Along with shifts in market conditions and investor risk appetite, the issuance market for new public funds in the first half of 2026 also underwent structural changes, characterized by "total expansion and structural iteration."

According to Wind data, 883 new public funds were issued in the first half, with a total issuance scale of 636.99B yuan, an increase of 530.35B yuan from 106.65B yuan in the same period of 2025, up 20.11% year-over-year.

From a product structure perspective, equity products became the main force of issuance. In the first half, stock and hybrid funds raised 378.18B yuan in new issuance, a year-over-year increase of 57.31%, accounting for nearly 60% of total new public fund issuance. This clearly shows that driven by profit-making effects, investor enthusiasm for allocating to equity funds continued to rise. In stark contrast, fixed-income products, which once accounted for nearly half of public fund issuance, saw a sharp drop in popularity. The new issuance share of bond funds halved in the first half, dropping from 46.73% in the same period of 2025 to 19.98%.

Meanwhile, FOFs became a dark horse in the first-half new issuance market, with explosive growth in scale. Data shows that 95 FOFs were issued in the first half, with a total issuance scale of 117.74B yuan, a significant increase of 259.5% from 32.75B yuan in the same period of 2025—far outpacing the growth of other fund categories. Their share of total issuance rose from 6.18% to 18.48%.

Regarding the "strong equities, weak bonds" phenomenon and the surge in FOF issuance, Bai Wenxi noted that in the short term, this is a suction effect driven by profit-making. The tech sector continues to strengthen, equity and hybrid funds perform well, naturally attracting capital inflows. Meanwhile, bond market adjustments and subdued bond fund returns lead to capital outflows as investors vote with their feet. In the medium to long term, this reflects a structural shift in household asset allocation: first, with deposit rates continuously declining, the trend of "deposits moving" into equity markets is clear; second, the surge in FOF issuance shows that investors are shifting from "choosing stocks themselves" to "entrusting professional institutions to choose funds," indicating a rise in professional financial awareness; third, the sharp drop in bond fund share reflects a repricing of low-risk appetite funds—no longer satisfied with the "low returns" of bond funds, they are willing to take on higher volatility for higher returns.

At the same time, Bai Wenxi reminded investors that if the tech rally reverses, redemption pressure on newly issued equity and hybrid funds will be far greater than that on bond funds, and the "strong equities, weak bonds" issuance structure could exacerbate market volatility.

Similarly, Yang Yu, a fund manager in the Asset Allocation and FOF Investment Department of China Merchants Fund, said, "From a medium-to-long-term perspective, we still favor the allocation value of equity assets. Although A-shares performed strongly in the first half, style divergence was extreme. Tech-related equity assets rose, while assets linked to traditional sectors, such as domestic demand and dividends, declined. Among these, many companies have solid and improving operations and stable free cash flow. After continuous adjustments, their valuations have become more reasonable or even undervalued, making overall allocation significantly more cost-effective. We believe these assets will perform well in the future."

** Dividend Payout Pace Slows **

Compared with the simultaneous rise in performance and new issuance scale, the overall dividend payout intensity of public funds declined in the first half of 2026, with a slower pace of realization. According to specific data from Wind, total dividend payouts from public funds in the first half reached 95.6B yuan, a year-over-year decline of 24.19% compared to 126.11 billion yuan in the first half of 2025.

Bai Wenxi interpreted this phenomenon from three aspects: First, NAV growth does not equal distributable profits. The first-half tech rally was mainly driven by valuation expansion. Many funds had substantial unrealized gains but limited distributable income. Second, fund managers have a "reluctance to distribute" mindset. In a strong sector, managers prefer to maintain positions to continue attacking rather than cash out. Especially in the fiercely competitive first half, distributing dividends means passive reduction in positions, potentially missing out on the rally. Third, bond funds, which are major dividend payers, saw a significant contraction in total dividends. Although equity funds performed well, their dividend payout ratios are inherently low.

As Bai Wenxi stated, total bond fund dividends in the first half reached 51.99B yuan, a year-over-year decline of 44.61%. Meanwhile, equity fund dividends totaled 37.31B yuan, a year-over-year increase of 37.89%.

Standing at the mid-year key point, attention on market sector trends and fund investment mainlines for the second half continues to heat up. Zhang Lin, a fund manager at China Merchants Fund, pointed out that the core driver of the extreme first-half market was the technological breakthrough in AI, leading to an industry explosion driven by FOMO (fear of missing out) growth. The tech rally may be in a mid-cycle transitional phase. In the second half, it is likely to maintain a state of "index fluctuating upward with rotation within tech," with possible short-term style shifts but difficulty in a complete transformation.

Regarding the first-half performance trends, Bai Wenxi offered suggestions to investors: reduce sector betting and increase allocation to balanced products; pay attention to the rebalancing value of FOFs and "fixed income+" products; be wary of the "champion curse"—first-half champion funds often have extreme sector bets, and their drawdowns can also be extreme when style rotates in the second half; dollar-cost averaging (DCA) is better than lump-sum investment—with increased uncertainty in the second half, smooth costs through DCA to avoid heavy lump-sum investment at emotional peaks.

"The first half of 2026 in the fund market has been six months of tech surges and structural fractures. In the second half, 'preserving gains' may be more important than 'attacking'—finding balance in differentiation, staying calm in frenzy—that is the right path for fund investors to navigate cycles." Bai Wenxi concluded.

(Editor: Xu Nannan)