Five years still, net value halved—what's wrong with these funds?

◎ Reporter Zhao Mingchao

Creating long-term stable returns for investors is the core mission and essential duty of public funds as professional institutional investors. Looking back at the A-share market trend over the past five years, the overall market has shown a structural positive trend: the Shanghai Composite Index, representing value style, hit a ten-year high within the year, while the ChiNext Index, representing growth style, broke through historical highs, highlighting the sustained long-term allocation value of the equity market.

However, from the overall performance of public funds, the industry presents an extreme pattern of performance divergence. Over the past five years, many funds that accurately captured the core track of tech growth have achieved impressive returns, with some products delivering doubled or even multi-fold excess returns. At the same time, a large number of funds are mired in long-term losses, with some products' net values nearly halved after five years of operation, and even more suffering losses exceeding 70%, forming a stark contrast to the overall positive market trend.

For fund investors, sticking with it for five years is not easy. Against the backdrop of advocating "rational investment, value investment, and long-term investment," why have some funds still suffered huge losses after five years of operation? Who should be held responsible for investors?

Poor Performance: Net Value Halved, Five Years a Dream

As the first half of 2026 comes to an end, public funds are also ushering in a mid-to-long-term performance review.

According to the latest "Fund Performance Evaluation Report" disclosed by Guotai Haitong Securities, as of June 30, the average return of 3,448 active equity funds over the past five years was 21.64%. However, further analysis reveals that over 1,300 funds have experienced losses over the past five years. Among them, 279 funds have lost more than 40%, and nearly 30 funds have lost more than 60%. For example, the Tianzhi Transformation and Upgrade Hybrid Fund has lost 72.87% over the past five years, while the Tongtai Big Health Theme Hybrid Fund, Tianzhi New Consumption Hybrid Fund, and Oriental Town Consumption Theme Hybrid Fund have all lost over 70% in the past five years.

Looking at these funds with significant losses, some have even lost money for consecutive years. Take the Tianzhi Quantitative Core Select Hybrid Fund as an example. Established in June 2019, it lost more than 10% each year from 2021 to 2025 and has lost about 5% this year. A similar case is the Green Steady Value Hybrid Fund. Established in October 2020, it also suffered losses each year from 2021 to 2025 and has lost more than 20% this year.

From the net value trend, some funds had their moments of glory, but over a longer period, their net value performance has been like a "roller coaster." For example, the Huatai-PineBridge Fundamental Select Hybrid Fund has lost over 60% in the past five years as of June 30 this year. The fund was established in June 2019, with a return of over 90% in 2020 and over 25% in 2021. Since then, the situation took a sharp turn. From 2022 to 2024, the fund's net value experienced significant drawdowns, and the original fund manager, Niu Yong, also left in August 2024, with Tan Xiao taking over. In 2025, the fund achieved an annual return of over 20%, but performance declined again this year, with a loss of over 20% in the first half.

Some funds frequently changed fund managers but still failed to reverse the decline. Take the Taiping Flexible Allocation Hybrid Fund as an example. As of June 30, the fund has lost 62.76% over the past five years. Over a longer period, the fund was established on February 10, 2015, and although it has been around for over 10 years, it has lost more than 50% since inception. The fund is currently co-managed by Lu Lingling and Xiao Chan. In addition to these two fund managers, the fund has previously had seven other fund managers.

Why Huge Losses: Misjudging Trends, Betting on the Wrong Track

Looking at the funds that accumulated huge losses over the past five years, the reasons for net value declines vary, but the core issues revolve around missing the main line of tech growth, betting on the wrong track, and following trends in speculation.

Take the Oriental Alpha Zhaoyang Hybrid Fund as an example. Established in March 2021, its holdings were relatively diversified in the early days, but starting from the end of 2021, the fund shifted to betting heavily on military stocks. According to the latest disclosed holdings for the first quarter of 2026, the fund's top ten heavy holdings are all military stocks, with the combined market value accounting for over 68% of the fund's net value.

"From the historical trend of A-shares, military stocks are more of a concept-driven speculation. Only a few individual stocks can deliver on their performance. Over a longer cycle, performance is the source of investment returns. This fund is not a military theme fund, yet it has been betting on military stocks for a long time, which is hard to understand," a senior investor from South China told a Shanghai Securities News reporter.

According to the announcement, the performance benchmark of the Oriental Alpha Zhaoyang Hybrid Fund is "CSI 800 Index return × 80% + CSI Aggregate Bond Index return × 10% + Hang Seng Index return × 10%." The fund's performance has significantly lagged behind its benchmark.

The Green Steady Value Hybrid Fund has also significantly underperformed its benchmark for a long time. The fund was established in October 2020, initially heavily invested in the consumer sector, and from 2022, it began to heavily invest in baijiu stocks. Since the fourth quarter of 2024, the fund's top ten heavy holdings have all been baijiu stocks, with almost no changes since then, making it a full-fledged "baijiu fund." In terms of concentration, as of the end of the first quarter this year, the combined market value of the top ten heavy holdings accounted for nearly 90% of the fund's net value.

Some funds suffer from rapid rotation of holdings. For example, the Oriental Town Consumption Theme Hybrid Fund frequently changes its top ten heavy holdings. At the end of 2025, the fund's top ten heavy holdings were mainly pharmaceutical stocks, home appliance stocks, etc. As of the end of the first quarter this year, the fund had replaced nine of its top ten heavy holdings, all adjusted to AI application sector stocks. In the fund's 2025 fourth-quarter report, the fund manager, when discussing investment directions of interest, said: "We are optimistic about optional consumer sectors such as pharmaceuticals, beauty care, media, and consumer electronics, which benefit from aging demographics and have long-term growth potential." However, in the fund's 2026 first-quarter report, the fund manager's strategy completely shifted: "This product will continue to deeply cultivate investment opportunities related to AI applications."

How to Achieve Long-term Wins: Adapt to the Times, Keep Pace with the Times

Compared with the above-mentioned funds that suffered huge losses, the public fund industry has also seen a number of long-term high-performing products over the past five years of structural market trends.

Statistics show that as of June 30, over 300 active equity funds have achieved returns of over 100% in the past five years. Specifically, the Yinhua Ruixiang Hybrid Fund has a five-year return of 521.61%, followed by the HuaShang Superior Industry Hybrid Fund with a five-year return of 507.63%. The Invesco Great Wall Stable Return Hybrid Fund, Bocom Schroders Optimal Return Hybrid Fund, and Caitong Fuxin Fixed Opening Hybrid Fund all have five-year returns exceeding 400%.

Looking at the leading funds in performance, the main reason is that they captured investment opportunities along the AI main line. Some funds have also achieved sustained upward net value through relatively balanced allocation strategies.

According to industry insiders, each fund manager has a different circle of competence. Over the past few years, market style rotation has been rapid, and fund managers inevitably face headwinds. However, for public fund investors, how many can endure still substantial losses after five years of investment?

In fact, some veteran investors are actively seeking change, helping fund net values to bottom out and rebound. Take the Ruiyuan Growth Value Hybrid Fund managed by Fu Pengbo as an example. In 2022 and 2023, it lost over 20% each year, sparking widespread market skepticism. Subsequently, the fund actively bought AI concept stocks such as PCBs and chips, and the fund's net value hit a new high in the second quarter of this year.

A fund research analyst in Shanghai said that in the surging tide of the times, it is crucial for investment philosophies to keep pace with the times. For fund managers, they should not lie in wait on a single track, hoping for the wind to come. Instead, they should prioritize the interests of fund holders, track industry development trends, and continuously refine their investment capabilities.

Zhang Mingxin, fund manager of the HuaShang Superior Industry Hybrid Fund, told reporters: "Investment opportunities with truly large-scale potential must closely align with the development main line—echoing the core direction of economic and social development and possessing genuine value creation capabilities."

Regarding funds that have performed poorly due to track betting, regulators are also imposing strict prohibitions. In April this year, the Asset Management Association of China issued the "Guidelines on Performance Appraisal Management for Fund Management Companies," specifying: If a fund product's performance over the past three years has lagged behind its performance benchmark by more than ten percentage points and the fund's profit margin is negative, the fund manager's performance-based compensation should be significantly reduced compared to the previous year, with a reduction of no less than 30%; if the performance lags behind the benchmark by more than ten percentage points but the fund's profit margin is positive, the compensation should be reduced; if the performance significantly exceeds the benchmark and the profit margin is positive, the compensation may be reasonably and appropriately increased.

(Editor: Xu Nannan)

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