Public fund annual reports disclose hidden large holdings, with multiple ST stocks appearing among them.

Ask AI · Why do public mutual funds favor ST stocks for distressed turnaround investing?

Everyday Business News reporter: Ren Fei    Everyday Business News editor: Ye Feng

As public mutual funds continue to disclose their 2025 annual reports, hidden heavy positions within funds have gradually come to light. Among them, ST-type individual stocks frequently appear in both fund top holdings and hidden heavy-holding sequences. In particular, among the holdings situations disclosed in the latest annual reports beyond the prior top ten heavy holdings, multiple stocks such as ST Renfu, *ST Qunchang, and *ST Songfa have drawn significant attention from institutions.

In addition, some funds allocate to multiple ST stocks. For instance, several funds including Invesco Great Wall Quantitative Select, and China Europe Quantitative Driving Hybrid have multiple ST holdings in their positions at the end of last year. Analysts noted that if there are no relevant restrictions in the fund contract, ST stocks are not necessarily a no-go area. Some investment strategies focus on uncovering distressed turnaround-type companies, and some ST stocks’ expectations for delisting cap removal align with such approaches.

Hidden heavy-holding stocks frequently appear in ST companies; some funds hold multiple ST stocks

With the disclosure of 2025 annual reports of public mutual funds, the funds’ full portfolio holdings at period end have been revealed in sequence. Beyond the top ten heavy holdings announced earlier, the other disclosed holding details in the annual reports have become a major focus. As a special category, ST stocks have also become a key target for many funds to allocate to.

As of March 31, 2026, among the already released 2025 annual reports of funds, multiple stocks including ST Renfu, *ST Qunchang, and *ST Songfa have attracted significant attention from institutions. Taking ordinary stock funds as an example, in period-end holdings there are 6 funds holding ST Renfu; in equity-biased hybrid funds, 3 funds hold this stock; and in flexible allocation funds, 11 funds hold this stock.

Judging from the market value of holdings at the end of the quarter, the value of ST Renfu held by the Harvest New Industry stock fund reaches 223 million yuan, accounting for 4.85% of net value at period end. Worth noting is that the stock is also the sixth-largest heavy holding of that fund. Similarly, within Harvest Fund, its Harvest Taihe Hybrid also holds ST Renfu, with a period-end holding market value of 119 million yuan.

ST Renfu is a leading company in China’s anesthesia drug sector, but it was punished due to multiple issues such as failing to disclose non-operating funds占用 in a timely manner and failing to disclose related-party transactions in a timely manner. Starting from December 16 of last year, its A-share stock abbreviation was changed to ST Renfu.

Of course, the number of funds holding this stock is relatively large, and it is mainly concentrated in certain thematic funds in biotech and technology industries. And based on data comparing holdings with quarter-over-quarter changes, many of the products under these heavily watched companies have conducted selling reductions. Moreover, these companies themselves are well-known leading firms in the industry, making them relatively easy to identify.

In addition, some relatively less well-known individual stocks have also drawn attention from institutions, but judging from their performance, things have not been ideal. For example, for *ST Jiyou, multiple funds under Invesco Great Wall participate in the allocation, including Invesco Great Wall Quantitative Small Cap, Invesco Great Wall Quantitative Select, and Invesco Great Wall Quantitative New Momentum, among others.

Industry: Asset allocation according to contract provisions, consistent with some investment strategies

Regarding whether ST-type individual stocks can enter the holdings of public mutual funds, or even appear in the top-heavy-holding sequence, when a reporter from The Daily Economic News inquired with relevant insiders on March 31, it was found that there are currently no explicit rules. However, some funds’ contracts do not allow such allocation.

A public fund insider in South China told the reporter that the existing fund investment management measures do not include explanations that prohibit investing in ST stocks. Therefore, as long as the contract does not explicitly state that there is no allocation risk for stocks under risk warning, in principle such allocation is allowed.

“Internally, they will definitely strictly review this type of stock. As long as the company’s fundamentals are fine—especially if there is even a performance trend for a distressed turnaround—then for fund managers who want to implement turnaround strategies, it could be included in the stock pool.” It is understood that as long as there are no explicit restrictions, even if the stock is allocated as one of the top ten heavy holdings, it is still possible.

Of course, some ST individual stocks that become heavily held are often those that, during the holding process, experience sudden events, leading to punishment and risk warning implementation. For this type of stock, the interviewees told the reporter that depending on the circumstances, they will also reduce positions or even clear the position. “If corporate governance is fine, then the possibility of adding to the position later is not impossible either.”

Based on the already disclosed holdings, the only comparable data for fund annual reports are the half-year report data. In contrast, many ST stocks are new positions. Some funds even hold multiple ST stocks. For example, in the statistics taken at the end of last year, the China Europe Quantitative Driving Hybrid held ST Deyun, ST Dahua, and ST Cuikua, none of which were allocated in mid-last year.

Of course, there are also funds that allocate multiple ST stocks, while in the fourth quarter of last year they reduced certain holdings. For example, when the Southern Securities Advantage Enterprise fund was counted at the end of last year, it allocated to ST Baling and ST Renfu, but the latter’s number of shares held was already sharply reduced compared with mid-last year. Similar situations also occurred with the Boshi Silk Road Theme fund’s *ST Songfa allocation. At the end of last year, its holding was left with only 43,000 shares, which is nearly a position-clearing style reduction compared with mid-last year.

Analysts noted that although public mutual funds can invest in ST stocks, many ST stocks are highly prone to liquidity crises. For stocks with a larger allocation weight, they can affect the overall return level of the portfolio. In practice, besides strengthening risk-control constraints, it is still advisable to avoid allocating to this type of assets, even as top-heavy holdings.

Note: Some 2025 public mutual fund annual reports include holdings of ST stocks, sorted by market value at period end   Source: Wind

The Daily Economic News