March concludes with increased market volatility Snowball: The current core of allocation should be "primarily cautious, with selective positioning"

Source: Xueqiu

On March 31, the A-share market wrapped up its monthly trading, with the Shanghai Composite Index falling 6.51% cumulatively this month.

The wrap-up day echoed last week’s global financial market turbulence—ongoing geopolitical conflicts, repeated shifts in liquidity expectations, and changes in capital structure jointly drove market performance, with a clear split in how major asset classes fared.

Xueqiu’s private fund research team, based on its assessment of strategies from funds currently “on the shelf,” pointed out that against an environment of broad market declines, Xueqiu’s various in-shelf private fund strategies showed distinct differentiation.

Jiang Yuting, head of Xueqiu’s finance and product research department, said, “With current market volatility and disturbances, the core of allocations should be ‘stable as the main priority, and choose the best for positioning’: different strategies should be matched as needed, balancing returns and risks.”

A manager of a discretionary strategy fund currently on Xueqiu’s platform said that the market has already priced in extreme risk-aversion sentiment about the possibility that the U.S. may launch ground operations in Iran. From a short-term perspective, even if related events play out in the next one to two weeks, risk-aversion sentiment may be close to its prior extreme, so the likelihood of a further sharp drop in the index is low.

Another manager of a discretionary strategy fund on Xueqiu’s platform said that the market may continue to be a structural market marked by volatility and differentiation. Medium-level industry conditions and micro-level performance are even more important. There are three directions worth watching: first, a commodity price-increase rally catalyzed by the escalation of overseas geopolitical conflict, such as oil, coal, new energy, and aluminum; second, defensive dividend-style themes, such as banks and utilities, as well as service consumption, agriculture, and food and beverage sectors that lean more toward domestic demand; third, directions with strong earnings certainty, such as AI hardware and software, advanced manufacturing, defense and military industries, innovative drugs, etc. After market risk appetite stabilizes, they may also show performance.

Xueqiu’s in-shelf private fund strategies—breakdown of performance

(1) Market-neutral highlights defensive value: According to data provided by Xueqiu’s private fund research team, the market-neutral strategy rose against the tide last week by 1.08%, becoming a standout among equity-type strategies. The strategy’s stock side’s excess returns rebounded back to the middle range; weekly excess performance still remained differentiated. On the hedge side, the widening of index futures basis (as indicated by the futures trading discount) contributed positively to portfolio returns.

(2) Equity strategies show internal differentiation: Xueqiu’s on-shelf quant long strategy fell an average of 0.29% last week, with absolute returns displaying a differentiated pattern, though most products posted better-than-benchmark excess returns. Discretionary long strategies declined 1.26% on a weekly basis; most products saw pullbacks. Funds heavily invested in areas such as chemicals and power led in gains. From the market environment perspective, overall liquidity remained ample: the financing balance was basically flat compared with the week before last, and the overnight funding rate stayed at a relatively low level. Market sentiment improved somewhat compared with the week before last, but overall it remained in a neutral-to-weak range, and trading volume declined noticeably versus earlier periods.

(3) CTA strategy affected by market environment disturbances: The commodity market performed well earlier, but it has also seen a certain degree of volatility recently. Last week, the Nanhua Commodity Index edged down 0.25%, with internal sector performance showing significant differentiation. Quant CTA strategies fell 0.35% week-on-week. Xueqiu’s private fund research team noted that the core reason is that the overall trend strength of the market is in a below-average weak level. Although market activity is relatively high, cross-sectional stability is poor, and it is further compounded by repeated disturbances from geopolitical news. Discretionary CTA strategies also showed differentiation. Currently, the market’s sensitivity to sentiment far exceeds that to underlying industry fundamentals, resulting in a back-and-forth volatility pattern.

(4) Macros and multi-asset strategies perform weakly: Although domestic assets have gradually started to become less sensitive, correlations between assets have been recovering toward normal, overall performance still remains relatively weak, and liquidity shocks have not yet been fully eliminated. Therefore, last week most macro strategies ended down, while multi-asset strategies displayed a differentiated pattern.

(5) Defensive亮点 in a choppy fixed-income market: Fixed-income strategies became a defensive highlight amid market volatility. Last week, pure bond strategies performed well; the CSI Convertible Bond Index rose, and fixed-income-type products overall delivered impressive performance.

Assets are gradually showing resilience

As a leading domestic private fund service platform, Xueqiu relies on a massive amount of on-shelf private fund data resources to build a comprehensive product selection mechanism and strategy research and judgment framework.

In response to the current market conditions, Xueqiu’s private fund research team further pointed out that for equity-type strategies, investors should adhere to the approach of building positions when prices are low, focusing on products with strong long-term performance. Especially in discretionary equity long strategies, market liquidity is maintained at ample levels, sentiment has somewhat repaired, and after entering the annual report season, products that emphasize value discovery may seize a good window to initiate positions. For commodity and CTA strategies, the team said quant CTA strategies are currently facing an overall weak environment, but products with medium-to-long-term cycle trends still hold value. In recent times, market volatility has increased. The team suggested that for discretionary CTA strategies, attention should be given to managers with strong trend-tracking capabilities and strict risk control. For macro strategies, although geopolitical conflicts continue, correlations between assets have been gradually repaired, and some macro-type assets have begun to show resilience. Even if long-term inflation expectations materialize, multi-asset strategies with hedging capabilities’ revenue-capture advantage will help seize opportunities for structural trades between assets.

(Editor: Xu Nannan)

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