A Detailed Explanation of Active ETFs--Observing the Layout of the First Batch of Pilot Managers

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Active stock ETFs have officially entered the countdown to issuance. This innovative product, spanning both active and passive investment camps, is regarded as the biggest product innovation in the fund industry over the past five years.

On July 17, issuance applications for the first batch of 18 active stock ETF products were submitted to the CSRC and "material received" status was confirmed. These involve 18 fund managers, with 9 products each proposed to be listed on the Shanghai and Shenzhen exchanges. Judging by the product names, the initial batch tends to focus on value/dividend, balanced/stable directions, reflecting managers' early emphasis on portfolio capacity, liquidity, and holding experience in product design.

In its latest research report, Guotai Haitong Securities pointed out that within the regulatory framework, there is considerable flexibility in strategy selection for active ETFs, with quant strategies such as dividend enhancement, PB-ROE, and balanced allocation all applicable. Back-testing data show these strategies can achieve significant long-term excess returns relative to market benchmarks. However, the report also cautions that historical back-testing does not guarantee future returns, and active ETFs should still be evaluated independently based on product strategy, fund manager, investment scope, liquidity, fees, and market environment.

Strategy Framework: Flexible Space Within Rule Constraints

According to the Shanghai Stock Exchange's "Business Guidelines for Actively Managed Exchange Traded Open-ended Securities Investment Funds," active ETF operations must meet several hard constraints: holding no fewer than 30 securities, the top 10 holdings' combined weight not exceeding 60% of net asset value; stocks held must have the past year's daily average transaction amount ranked in the top 80% of all listed stocks on the exchange; turnover must be reasonably controlled, investment style kept stable, and an appropriate performance benchmark set.

Within these constraints, there is still considerable space for strategy selection. According to Guotai Haitong Securities' research, there are roughly two feasible paths: one focuses on defensive strategies like "large-cap value" or "dividend low volatility," using quant models to screen undervalued, high-dividend, low-volatility targets to pursue stable returns while ensuring diversified holdings and liquidity; the other targets broad market benchmarks with "balanced strategies," balancing value and growth styles or adopting a PB-ROE factor framework to achieve excess returns while following the market benchmark.

Dividend Enhancement: High Fault Tolerance, Good Long-term Experience

Guotai Haitong Securities research used quantitative back-testing to show the operational logic of the dividend enhancement strategy. Starting with all A-shares, it applies liquidity screening, builds a low-volatility stock pool, initially screens for dividend yield, and finally selects about 100 stocks based on low-volatility and quality fundamental factors. It rebalances four times a year, with a maximum stock weight of no more than 5%.

Back-testing data show that, after deducting a 0.2% one-way trading cost, from 2013 to July 2026, this strategy had an annualized return of 20.2%, information ratio of 1.11, maximum drawdown of 34.0%, and a monthly win rate of 63.8%. Compared with the CSI Dividend (All) Index, the annualized excess return over the entire period reached 10.0%, with lower volatility and smaller drawdowns. Looking at rolling 3-year returns, buying at any point and holding for 3 years yielded average cumulative returns of 80.4%, with a 100% positive return rate, indicating high fault tolerance for entry timing.

PB-ROE: Balanced Stock Selection, Stable Excess Returns

The core logic of the PB-ROE strategy is "buying fundamentally strong stocks at reasonable valuations". Specifically, the strategy first excludes stocks whose valuations overstate profitability, then uses a composite score from profitability, growth, cash flow, and expected earnings adjustment factors to select about 100 stocks for a market-cap-weighted portfolio, rebalanced monthly.

Back-testing results show that from 2013 to July 2026, this strategy had an annualized return of 15.2%, annualized excess return of 10.4% relative to the CSI 800 Index, information ratio of 1.32, and a maximum relative drawdown of 10.6%. On a rolling 3-year basis, buying at any point and holding for 3 years produced an average return of 51.1%, far above the CSI 800's 12.5%, with a 100% win rate for cumulative excess returns over 3 years.

Balanced Allocation: Composite Strategy, More Stable Excess

The balanced allocation strategy combines equally weighted dividend enhancement and growth selection portfolios to smooth out single-style volatility. Back-testing data show that from 2013 to July 2026, this strategy had an annualized return of 22.4%, annualized excess return of 17.6% relative to the CSI 800 Index, an information ratio of 2.09, and a maximum relative drawdown of only 7.9%. The average 3-year holding yield was 82.3%, with nearly 100% win rates for cumulative excess returns over 3 years. Across the three strategies, balanced allocation stands out for the stability of excess returns and drawdown control.

First Batch Layout: Value Prevails, Style Diversification

According to Guotai Haitong Securities’ research, among the first batch of 18 active ETFs, 11 products clearly indicate investment styles in their names: 7 value, 3 balanced, and 1 growth; 7 others do not directly indicate style and use keywords such as "quality," "prosperity," "industry selection," or "competitive advantage," showing stronger active stock-picking attributes.

Value/Dividend Direction is the most prevalent style type in the first pilot batch, with 7 products from managers including China Universal, Harvest, ICBC Credit Suisse, Dacheng, Penghua, CMB, and Huatai-PineBridge. In Q1 2026, the combined active management scale of these 7 companies was about 821.357 billion yuan. Judging from their existing product lines, these managers are not exclusively focused on value style but generally prioritize balanced and growth styles, with value as supplementary allocation. Their overall research base is relatively balanced, with China Universal, Harvest, and ICBC Credit Suisse standing out for value product scale.

Balanced Style includes 3 products from Huitianfu, Guotai, and Tianhong, with a total active management scale of about 271.372 billion yuan in Q1 2026. These companies’ existing active equity funds mainly focus on balanced style, consistent with their balanced allocation product positioning, among which Huitianfu’s balanced funds have a scale of 46.498 billion yuan, the largest.

Growth Style so far has only been adopted by Morgan Fund, with its Morgan Core Growth Active Management ETF. Morgan’s active equity products primarily focus on growth, with growth funds totaling 20.342 billion yuan, higher than the balanced funds' 8.801 billion yuan, closely matching its "core growth" positioning.

Unspecified Style applies to 7 products by managers including E Fund, Yongying, Southern, Hu’an, Ping An, Huabao, and CCB, with a total active management scale of about 845.628 billion yuan, the largest. The styles of these managers’ existing products differ greatly: E Fund emphasizes growth, Southern leans toward balanced, and overall they can support active stock selection, industry selection, or multi-style diversified strategies. Further assessment based on product contracts and investment scope will be needed.

Guotai Haitong Securities research points out that overall, the existing product lines of the first batch of active ETF managers are reasonably aligned with the proposed product styles, reflecting early attention to portfolio capacity, liquidity, and holding experience in product design. But all products are still at the material acceptance stage, specific strategies and investment scopes have not yet been fully determined, and investors should make independent evaluations based on product strategy, fund manager, fee rate, and market conditions after formal issuance.

Risk Warning and DisclaimerThe market carries risks and investments should be made cautiously. This article does not constitute individual investment advice and does not take into account the specific investment goals, financial situation, or needs of any particular user. Users should consider whether any opinions, viewpoints, or conclusions herein suit their personal situation. Investments made based on this are at the user's own risk. ```