Executive Summary
Key insights from Huabao Fund’s recent fund liquidation and strategic direction:
- Huabao Fund liquidated the Huabao Specialized and Sophisticated Mixed Fund despite a 60% gain in 2025, due to persistent small scale and lack of external investor interest.
- The fund was primarily self-funded by Huabao, with the company contributing 10 million RMB at inception, highlighting difficulties in attracting outside capital.
- Huabao has liquidated 7 funds in 2025, with 6 being active equity funds, while ETF products continue to dominate their growth strategy.
- This reflects a broader strategic imbalance in Huabao’s product focus, with mixed funds stagnating and ETFs expanding rapidly.
- Leadership changes and market trends suggest a continued emphasis on ETFs, raising questions about the future of active management at Huabao.
The Paradox of Performance and Liquidation
In a surprising development that underscores the complexities of China’s equity markets, Huabao Fund (华宝基金) recently liquidated a mixed fund that had delivered impressive returns, highlighting a critical strategic imbalance in the firm’s approach. The Huabao Specialized and Sophisticated Mixed Fund (华宝专精特新混合发起式), which saw its net value surge over 60% in 2025 and more than double in the past year, was terminated due to insufficient scale, falling below the 2 billion RMB liquidation threshold. This case reveals how even strong performance cannot always overcome structural challenges in fund management.
Fund Details and Historical Performance
The Huabao Specialized and Sophisticated Mixed Fund was established on September 27, 2022, with an initial raised capital of only 14.5366 million RMB, making it a classic ‘mini fund’. Huabao Fund itself contributed 10 million RMB, representing nearly 70% of the total assets. This self-funding approach is characteristic of initiated funds, which require the fund company or its executives to invest at least 10 million RMB and hold it for three years. Despite a rocky start where the net value dropped to a historic low of 0.5455 on September 23, 2024, the fund rebounded sharply in 2025. By the liquidation date on September 26, 2025, the net value had reached 1.1935, placing it in the top 6% of similar products. However, the early losses made it difficult to attract sustained investor interest, leading to its eventual liquidation with assets totaling just 14.3183 million RMB.
Scale Issues and Investor Apathy
The fund’s inability to grow beyond its initial small size despite recent outperformance points to deeper issues in investor confidence and market positioning. Over its three-year lifespan, the fund reported net profits of -1.2772 million RMB in 2022, -1.1436 million RMB in 2023, -584,600 RMB in 2024, and 1.1144 million RMB in the first half of 2025. The product’s liquidation report showed undistributed profits of 2.2371 million RMB, with total profits reaching 346,200 RMB. Management fees during this period amounted to 364,600 RMB. Essentially, Huabao Fund used its own 10 million RMB to manage the fund, earning minimal returns while facing continuous outflows. This strategic imbalance between performance and scale growth reflects broader challenges in China’s active fund management sector, where investor preferences are shifting towards more transparent and cost-effective products.
Huabao Fund’s Liquidation Spree in 2025
Huabao Fund’s strategic challenges extend beyond a single fund, with seven products liquidated in 2025 alone. Six of these were active equity funds closed due to scale deficiencies, while one passive index fund was terminated through a shareholder vote. This trend highlights the firm’s ongoing struggle to maintain viable active management operations amid changing market dynamics. The rapid liquidation of some funds, such as the Huabao Yuanshi Mixed Fund (华宝远识混合), which operated for just seven months before closure, signals urgent need for strategic reassessment.
Other Liquidated Funds and Their Stories
The Huabao Yuanshi Mixed Fund presents another case of scale collapse despite reasonable performance. Launched on March 18, 2025, with initial assets of 237 million RMB, the fund’s size plummeted 92.93% to just 17 million RMB by the end of the first half. It reported an 11.17% return over six months before liquidation, but ranked only 3997 out of 4620 similar products. This pattern of rapid asset depletion suggests that Huabao’s active funds are failing to retain investor capital even in improving market conditions. The strategic imbalance is evident in the contrast between these liquidations and the firm’s overall standing: Huabao Fund manages 360.923 billion RMB in total assets, ranking 29th among 192 public fund institutions, yet its mixed fund segment represents just 4.32% of this total at 15.581 billion RMB.
Impact on Active Equity Portfolio
The liquidation trend has significantly impacted Huabao’s active equity team, with several fund managers overseeing sub-scale portfolios. Fund manager Zhong Qi (钟奇), who managed the liquidated Specialized and Sophisticated Fund, now oversees just 93 million RMB across remaining products. Other managers like Zheng Yingliang (郑英亮) manage approximately 211 million RMB, while former manager Zhuang Haoliang (庄皓亮) departed in August 2025 with portfolios totaling only 253 million RMB. This shrinkage in active management capabilities contrasts sharply with the firm’s historical position; Huabao’s mixed fund scale peaked above 30 billion RMB in Q4 2020 but has since contracted steadily. Even during the market recovery that began in late 2024, Huabao failed to capitalize on the opportunity, with mixed fund assets remaining stagnant while competitors gained ground.
Strategic Imbalance: ETFs vs. Active Management
Huabao Fund’s current strategic imbalance is most apparent in the divergent trajectories of its ETF and active management businesses. While active funds struggle, the firm’s ETF division has become the undeniable growth engine, with non-monetary ETF assets reaching 90.875 billion RMB by Q3 2025, a six-fold increase over six years. This represents 20.4% year-over-year growth and places Huabao 12th in the industry for ETF scale. The firm has clearly prioritized index products in recent years, with 20 of the 26 funds launched in 2025 being ETFs or ETF联接 funds.
ETF Growth and Dominance
Huabao’s ETF success story includes several flagship products that have attracted significant investor capital. The firm’s券商ETF, 医疗ETF, and 银行ETF have each surpassed 10 billion RMB in assets, demonstrating strong market acceptance. In September 2025, Huabao launched the Agriculture, Animal Husbandry and Fishery ETF (农牧渔ETF) on the Shenzhen Stock Exchange (深圳证券交易所), the first ETF tracking the CSI All Share Agriculture, Animal Husbandry and Fishery Index. This continued innovation in the ETF space contrasts sharply with the neglect visible in active fund development. Wang Zhaojian (王兆江),常务院长 of Beishan Changcheng Fund Research Institute, notes: ‘The growth of index funds represents policy guidance and market choice resonating together. Regulatory authorities clearly promote the development of index investing, aiming to guide medium to long-term funds into the market and build a ‘long money, long investment’ market ecosystem.’
Neglect of Active Funds
The strategic imbalance at Huabao manifests in resource allocation that increasingly favors passive products over active management. While the firm’s ETF business receives substantial investment and attention, active equity funds have seen limited support and development. This approach has created a vicious cycle where underperforming active funds fail to attract assets, leading to further resource withdrawal. The result is a growing strategic imbalance that could limit Huabao’s ability to compete across multiple product categories. Wang Zhaojian (王兆江) adds perspective: ‘The current stage resembles a market clearance where ‘good money drives out bad.’ The crude active investment strategies that relied on style speculation and concentrated holdings are becoming ineffective. The market now demands that active fund managers possess genuine deep research capabilities and the ability to create excess returns.’
Leadership Transition and Future Outlook
Huabao Fund’s strategic direction faces a potential inflection point with recent leadership changes. On August 23, 2025, the company announced that former chairman Huang Kongwei (黄孔威) had resigned due to age reasons, with Xia Xuesong (夏雪松), former chairman of Baoshan Iron & Steel Co., Ltd. (宝信软件), taking over. Both chairmen hail from majority shareholder China Baowu Steel Group (中国宝武钢铁集团), indicating continued parental influence over strategic decisions. Huang Kongwei’s (黄孔威) three-year tenure saw ETF breakthroughs but overall fund scale stagnation, making the new chairman’s approach crucial for addressing the firm’s strategic imbalance.
New Chairman’s Vision
Xia Xuesong (夏雪松), born in 1970, previously articulated strategic priorities in an August 2025 statement on China Baowu’s official social media account. He emphasized ‘continuously consolidating market share in existing advantageous products such as monetary funds, bond funds, quantitative strategies, and overseas investments, while vigorously promoting innovation in thematic ETF indices and fixed income plus products.’ This vision suggests continued emphasis on Huabao’s ETF strengths while potentially neglecting the active management segment. The strategic imbalance may thus persist unless explicit measures are taken to rebalance the product mix. Investors will watch closely whether Xia Xuesong’s (夏雪松) leadership can break the four-year stagnation in overall fund management scale that has characterized Huang Kongwei’s (黄孔威) term.
Expert Insights on Market Trends
Industry experts see Huabao’s situation as reflective of broader market evolution rather than isolated corporate challenges. The growth of ETF investing in China represents a structural shift in investor preferences toward transparency, lower costs, and diversification. However, this doesn’t necessarily signal the end of active management. As Wang Zhaojian (王兆江) explains, ‘This doesn’t mean active management will gradually exit the stage. The current phase is more about market clearance where superior products drive out inferior ones. Active fund managers now face higher requirements—they must possess genuine deep research capabilities and the ability to generate alpha.’ For Huabao, the path forward likely involves addressing the strategic imbalance by either committing resources to rebuild active capabilities or accepting a narrower focus on passive products.
Navigating Huabao Fund’s Strategic Crossroads
Huabao Fund stands at a critical juncture, with the liquidation of a high-performing fund highlighting deeper strategic challenges. The firm’s success in ETFs demonstrates competitive strength in passive management, but the neglect of active equity products creates vulnerability in a diversified market. The strategic imbalance between these business lines has resulted in four years of overall scale stagnation, even as specific ETF products flourish. Leadership changes offer an opportunity for course correction, but whether the new chairman will rebalance resources remains uncertain. For investors, Huabao’s situation underscores the importance of monitoring not just fund performance but also the strategic direction of asset managers. The coming months will reveal whether Huabao can leverage its ETF expertise while addressing the weaknesses in its active management lineup, or if the strategic imbalance will continue to define its market position. As China’s fund industry evolves, firms that successfully balance passive and active strategies will likely emerge as long-term winners.