It is Difficult to Consistently Outperform the Index in the Medium to Long Term

From the practice of the U.S. market, active investing struggles to outperform index investing over the long term. Although the domestic market has not yet reached a high level of efficiency, compared to developed markets like the U.S., active funds currently find it relatively easier to generate excess Alpha. However, in the medium to long term, the success rate of domestic active funds relative to the CSI All Share Index will also decline significantly.
Comparing the cumulative returns of active funds and the index, as the statistical period extends, the historical success rate of active funds gradually decreases. Using the CSI All Share Index as a proxy for the entire market, active funds with a track record of less than 3 years have an average annual success rate of over 50%, while those with more than 8 years of history have an annual success rate of less than 40%.

Clear Low-Cost Advantage

Statistics on the management fees of domestic ordinary equity funds, equity index funds, and equity ETFs show that the net asset-weighted management fee of equity index funds is 0.72% lower than that of ordinary equity funds, while the management fee of equity ETFs is 1.05% lower. Since 2019, the management fees of newly established equity ETFs have further decreased, highlighting the low-cost advantage of index products.
Additionally, for active funds, higher management fees and the high transaction costs resulting from turnover rates mean that cost savings will have a more significant impact over the long term.

Increased Investor Holdings Play a Positive Role in Asset Allocation

Since 2018, both institutional and individual investors have increased their holdings of index products, with their shares continuously rising. The proportion held by institutional investors has been steadily increasing, reflecting the positive role of index products in asset allocation and portfolio management.