Executive Summary
Key takeaways from Dacheng Fund’s recent performance challenges:
- Dacheng Fund’s active equity products have shifted from top performers in the bear market to underperformers in the current bull market, highlighting significant bull market underperformance issues.
- Defensive investment strategies focused on value stocks have backfired, causing the fund to miss out on tech and growth sector rallies.
- High portfolio turnover rates and style drift in several funds have eroded investor trust and amplified losses.
- Slow adaptation by key fund managers, including Xu Yan (徐彦), has led to missed opportunities and substantial fund outflows.
- Systemic changes in Dacheng Fund’s research and decision-making frameworks are critical to reversing the downturn and aligning with industry trends.
Unpacking Dacheng Fund’s Sudden Performance Slide
China’s equity markets have been riding a structural bull wave, but not all players are surfing it successfully. Dacheng Fund (大成基金), once a beacon of resilience during the 2023-2024 bear market, is now grappling with a stark reversal of fortunes. Recent data from quarterly disclosures reveals that the firm’s active equity products have tumbled in rankings, with bull market underperformance becoming a central concern for investors and analysts alike. This shift underscores the challenges even established funds face when market dynamics evolve rapidly.
The contrast is striking: Dacheng Fund previously leveraged defensive tactics to deliver a 7.99% absolute return in active equities during the downturn, outperforming 23 other major public fund houses. However, by the end of September 2025, its annual returns had plummeted to near the bottom of its peer group. This bull market underperformance has triggered scrutiny into whether the fund’s core strategies are out of sync with today’s growth-oriented environment. For global investors eyeing Chinese equities, understanding these nuances is essential to navigating portfolio risks.
Data Insights from Q3 2025 Reports
According to Guotai Haitong Securities (国泰海通证券) analytics, Dacheng Fund’s active equity returns have deteriorated sharply. Year-to-date, its products rank second to last among comparable funds, with negative excess returns relative to benchmarks. For instance, the Dacheng Gaoxin Stock Fund (大成高鑫股票), a flagship product with a historical cumulative return of 423.11% since its 2015 inception, saw its assets under management drop from CNY 12.36 billion in Q1 2025 to CNY 11.45 billion by Q3. This decline coincided with its underperformance against the CSI 300 Index, which surged 16.07% in Q3 2024 while the fund gained only 9.24%.
Other sizable funds, such as Dacheng Ruixiang Mixed A (大成睿享混合A) and Dacheng Strategy Return Mixed A (大成策略回报混合A), also lagged the CSI 300. These trends highlight a broader pattern of bull market underperformance, where previously successful defensive postures are now hindering growth. Investors should monitor these metrics closely, as they signal potential volatility in fund allocations.
Comparative Analysis with Benchmarks
The CSI 300 Index’s robust gains in 2025—driven by tech and innovation sectors—have exposed Dacheng Fund’s reliance on value-heavy portfolios. While the fund’s conservative approach shielded it during downturns, its inability to pivot has resulted in significant opportunity costs. For example, from Q2 to Q3 2025, the CSI 300 climbed over 10%, yet Dacheng’s equity products largely missed this rally. This bull market underperformance is not just a short-term blip but a symptom of deeper strategic inertia that could affect long-term investor returns if unaddressed.
The Defensive Strategy Backfire in a Bull Market
Dacheng Fund’s earlier success was built on a foundation of risk aversion and value investing, which paid off handsomely in bearish conditions. However, the same principles have become liabilities in a market favoring growth and technology. The fund’s bull market underperformance stems from its hesitation to reallocate assets toward high-growth sectors, such as artificial intelligence and green energy, which have propelled indices like the CSI 300 to new highs.
This misalignment is evident in the holdings of top fund managers. Han Chuang (韩创), overseeing products like Dacheng Ruijing Flexible Allocation Mixed (大成睿景灵活配置混合), has concentrated positions in resource stocks such as Xingye Yinti (兴业银锡) and Shandong Gold (山东黄金). Similarly, Liu Xu (刘旭)’s funds, including Dacheng Advantage Enterprise Mixed (大成优势企业混合), are heavily weighted toward traditional value picks like China Mobile (中国移动) and Midea Group (美的集团). While these stocks offer stability, they lack the explosive growth potential needed in a bull phase, leading to pronounced bull market underperformance.
Value-Oriented Holdings Exposed
An analysis of Dacheng Fund’s portfolios reveals a stark contrast between fund labels and actual investments. Products branded as ‘growth’ or ‘new edge’ often hold cyclical or value equities, creating a style drift that misleads investors. For instance, Dacheng Xinye Industry Mixed (大成新锐产业混合), despite its name, maintains significant exposure to basic materials and utilities. This discrepancy not only fuels bull market underperformance but also raises ethical concerns about transparency and strategy consistency.
Key data points:
- Over 60% of Dacheng’s large-cap equity funds are invested in value sectors, versus less than 30% in growth industries.
- Funds with ‘growth’ in their names have underperformed growth-focused benchmarks by an average of 8% in 2025.
Case Studies of Key Fund Managers
Han Chuang (韩创) and Liu Xu (刘旭) exemplify the fund’s adherence to value investing. Han’s top holdings in resources and industrials have provided downside protection but limited upside in the current rally. Liu’s preference for blue-chips like Haomai Technology (豪迈科技) has similarly capped returns. Their approaches, while prudent in isolation, collectively contribute to Dacheng Fund’s bull market underperformance by neglecting sectors with higher volatility and reward profiles. Investors should assess whether these managers can adapt or if broader changes are needed.
Adaptation Lag and Mounting Investor Dissatisfaction
Beyond portfolio composition, Dacheng Fund’s operational delays have exacerbated its bull market underperformance. The case of Xu Yan (徐彦), Chief Equity Investment Officer, illustrates this vividly. His Dacheng Xingyuan Qihang Mixed Fund (大成兴远启航混合), launched in March 2025, maintained an 84% cash allocation for months, only reaching the minimum 60% equity threshold by September. This sluggish deployment caused the fund to miss double-digit gains in the CSI 300, resulting in a meager 0.24% return since inception and a nearly 50% drop in assets under management.
Investor frustration is palpable on fund platforms, where comments like ‘Is the manager hiding from the bull?’ abound. This sentiment reflects a broader loss of confidence, as bull market underperformance coupled with perceived indecision drives redemptions. For institutional investors, these signals warrant a review of exposure to funds with similar adaptation issues.
Xu Yan’s Missed Opportunities
Xu Yan (徐彦)’s delayed entry into equities cost the fund critical growth periods. Between April and August 2025, when the market rallied, his fund’s low equity exposure led to an estimated opportunity loss of over 12% relative to peers. This bull market underperformance highlights a cultural or procedural rigidity within Dacheng Fund that prioritizes caution over agility. As one industry expert noted, ‘In fast-moving markets, hesitation is often more costly than missteps.’
Market Response and Fund Outflows
The financial impact extends beyond returns. Dacheng Xingyuan Qihang Mixed Fund’s assets shrunk from CNY 1.33 billion to CNY 695 million within months, signaling investor flight. This trend is echoed in other Dacheng products, where net outflows have pressured management fees and operational stability. Data from Morningstar China (晨星中国) indicates that Dacheng Fund’s overall market share in active equities has dipped by 2% in 2025, further cementing its bull market underperformance narrative.
Desperate Measures: High Turnover and Its Consequences
In a bid to counter its bull market underperformance, Dacheng Fund has resorted to aggressive trading, but this has yet to yield positive results. Funds like Dacheng Industry Pioneer Mixed (大成行业先锋混合) saw turnover rates skyrocket from 520% to 1,847% year-over-year—nearly six times the industry average. Similarly, Dacheng Growth进取 (大成成长进取) experienced a jump from 178% to 904% over three years. This frenetic activity incurs high transaction costs and reflects a ‘panic adjustment’ rather than a strategic pivot.
Despite the elevated turnover, performance has not improved. Dacheng Industry Pioneer Mixed posted negative returns over the past year, lagging both its benchmark and the broader market. This suggests that bull market underperformance cannot be resolved through reactive measures alone. Instead, it points to a need for coherent, research-driven strategy shifts.
Surge in Trading Activity
An examination of Dacheng Industry Pioneer Mixed’s portfolio shows extreme volatility, with only two stocks—Industrial and Commercial Bank of China (工商银行) and SMIC (中芯国际)—appearing in top holdings across multiple quarters. The rest were frequently rotated, indicating a lack of conviction. This high churn not only elevates costs but also undermines the long-term investment philosophy that Dacheng Fund once championed.
Impact on Costs and Performance
High turnover directly increases brokerage fees and taxes, eroding net returns. For Dacheng Fund, estimated transaction costs for affected funds rose by over 40% in 2025, compounding bull market underperformance. Moreover, frequent rebalancing can lead to missed compounding opportunities, as portfolios fail to hold winning positions long enough. Investors should be wary of funds with abruptly spiking turnover, as it often signals internal turmoil rather than calculated strategy.
Systemic Challenges and the Path Forward
Dacheng Fund’s bull market underperformance is not merely a series of isolated missteps but a reflection of systemic issues within its investment research framework. As one of China’s ‘old ten’ public fund houses, its legacy processes may be ill-suited to today’s dynamic markets. The fund’s reliance on defensive models, slow decision-making, and style drift all point to a need for structural reform. In an industry moving toward lower fees and long-term stewardship, Dacheng’s current trajectory risks alienating both regulators and investors.
Addressing these challenges requires a multi-faceted approach: enhancing research on emerging sectors, empowering managers with faster execution tools, and improving transparency to rebuild trust. For example, integrating AI-driven analytics could help identify growth trends earlier, while clearer fund labeling would reduce style drift concerns. Without such changes, bull market underperformance may persist, diminishing Dacheng Fund’s competitive edge.
Need for Research System Overhaul
A robust research framework is the bedrock of consistent performance. Dacheng Fund’s current system appears slow to assimilate market shifts, leading to bull market underperformance. By fostering a culture of innovation and cross-team collaboration, the fund could better anticipate sector rotations. Additionally, hiring specialists in tech and consumer discretionary sectors would diversify expertise beyond traditional value investing.
Industry Implications and Lessons
Dacheng Fund’s struggles offer broader lessons for the asset management industry. In China’s evolving regulatory landscape, where the China Securities Regulatory Commission (CSRC) emphasizes stability and investor protection, funds must balance defense with agility. Bull market underperformance cases like this underscore the importance of adaptive strategies that can thrive across market cycles. For global investors, this serves as a reminder to diversify across fund styles and monitor managerial adaptability closely.
Key Takeaways and Investor Guidance
Dacheng Fund’s experience highlights the perils of over-relying on defensive tactics in a bull market. Its bull market underperformance stems from a combination of strategic inertia, operational delays, and reactive measures like high turnover. For investors, the implications are clear: prioritize funds with flexible, research-backed approaches and avoid those with significant style drift or slow adaptation histories.
Moving forward, Dacheng Fund must undertake systemic reforms to regain its footing. This includes overhauling its research pipeline, clarifying investment mandates, and enhancing manager accountability. Investors should track the fund’s quarterly disclosures for signs of improvement, such as reduced turnover or increased growth-sector exposure. By learning from this case, market participants can better navigate the complexities of Chinese equities and capitalize on opportunities while mitigating risks. Stay informed with ongoing analysis to make data-driven investment decisions in this vibrant market.