--- title: "Are active equity funds making a comeback?" type: "Topics" locale: "en" url: "https://longbridge.com/en/topics/32653449.md" description: "Introduction: Performance has completely surpassed passive index funds, but the reconstruction of investor trust still takes time. In recent years, the debate between active and passive investing has been a hot topic in the capital market. Since 2023, compared to the counter-trend rise of passive equity funds, the market share of active equity funds has been continuously "eroded," and their "pricing power" in the A-share market was even surpassed by passive index funds by the end of last year, which once raised doubts about their allocation value. However, a dramatic turnaround has occurred this year. Taking the past July as an example, over 70% of active equity funds outperformed their benchmarks that month..." datetime: "2025-08-06T08:38:39.000Z" locales: - [en](https://longbridge.com/en/topics/32653449.md) - [zh-CN](https://longbridge.com/zh-CN/topics/32653449.md) - [zh-HK](https://longbridge.com/zh-HK/topics/32653449.md) author: "[阿尔法工场](https://longbridge.com/en/profiles/5044766.md)" --- > Supported Languages: [简体中文](https://longbridge.com/zh-CN/topics/32653449.md) | [繁體中文](https://longbridge.com/zh-HK/topics/32653449.md) # Are active equity funds making a comeback? Introduction: Performance comprehensively surpasses passive index funds, but the reconstruction of investor trust still takes time. In recent years, the debate between active and passive investing has been a hot topic in the capital market. Since 2023, compared to the counter-trend rise of passive equity funds, the market share of active equity funds has been continuously "eroded," and their "pricing power" in the A-share market was even surpassed by passive index funds by the end of last year, leading to doubts about their allocation value. However, a dramatic turnaround has occurred this year. Taking July as an example, over 70% of active equity funds outperformed their benchmarks, meaning more than 70% of active equity funds beat major broad-based indices. In contrast, during the A-share "9.24" rebound last year, this proportion was less than 30%. From 30% to 70%, active equity funds have finally gained overdue recognition, and discussions about their performance recovery have increased. 01 The Collective Awakening of the Biopharmaceutical Sector According to Wind data, as of the end of July, the average return of over 4,100 active equity funds (excluding those established after 2025 and retaining only one share class) was 14.05% year-to-date, outperforming mainstream indices such as the CSI 300 (3.58%) and CSI 500 (8.74%). Moreover, 92.33% of active equity funds achieved positive returns. In contrast, nearly 1,200 passive index funds (retaining only one share class and excluding feeder funds) established before 2025 posted an average return of 10.94% year-to-date, with 90.38% delivering positive returns. It can be said that active equity funds have demonstrated a clear advantage this year, whether compared to mainstream indices or passive index funds tracking various benchmarks. Among them, biopharmaceutical-themed funds are undoubtedly the biggest winners. In the active equity fund space, all five "doubling funds" this year have bet heavily on the biopharmaceutical sector, with Great Wall Healthcare Industry Select leading the pack with a 127.05% gain, followed by BOC Hong Kong Healthcare and Yongying Healthcare Innovation Select. Among passive index funds, those tracking biopharmaceutical indices, while trailing the top-performing active funds by nearly 30%, also showed strong momentum. For example, China Universal China Securities Hong Kong Biopharmaceutical ETF and Wanjia China Securities Hong Kong Biopharmaceutical ETF doubled their returns this year. Overall, active equity funds have enjoyed a "mini-spring" this year—both in terms of average returns and top-performing products, they have demonstrated superior investment advantages over passive index funds. 02 The Paradox of "Redemption Amid Rising Returns" Despite impressive performance, redemption pressures have intensified. According to the recently disclosed Q2 2025 reports, the total size of active equity funds was RMB 3.27 trillion, accounting for 9.69% of the total public fund market, a decrease of RMB 36.662 billion from the end of Q1. The decline in shares was even more pronounced, with active equity funds seeing a net outflow of 86.698 billion shares in Q2. However, from a single-fund perspective, products with strong performance still attracted inflows. For example, China Universal Innovation Healthcare saw the largest inflow, with shares increasing by RMB 1.982 billion in Q2. Combined with the strong performance of biopharmaceuticals in Q2, the fund size grew by RMB 4.357 billion. This trend was also evident among the top 10 funds by share growth. Brother Ji noted that CaTong Asset Management Digital Economy A, managed by Bao Yiwen, became the only product under a securities asset management subsidiary with public fund management qualifications to achieve share growth—a net increase of 939 million shares in Q2. This "report card" reflects market recognition of Bao Yiwen’s investment management capabilities. Unlike most public fund managers, Bao Yiwen’s unique career trajectory—including experience at an insurance asset management firm—has endowed him with a differentiated investment framework, blending absolute and relative return management. His experience managing annuity and pension portfolios has also made him more focused on investment safety margins and undervalued opportunities—a philosophy reflected in his portfolio allocations. For example, in Q2, Bao Yiwen significantly increased holdings in fintech companies under CaTong Asset Management Innovation Growth, driven by his in-depth research on stablecoins: cross-border payments and asset tokenization could reshape traditional finance, and fintech, as a long-undervalued beneficiary, holds significant potential. Additionally, Bao Yiwen revisited the investment logic of M&A beneficiaries in 2013-2015 and analyzed overseas cases of analog chip and industrial software expansion via M&A, focusing on domestic semiconductor leaders with M&A potential and scarcity. Unlike many tech-focused managers heavily invested in overseas computing segments like optical modules and PCBs, Bao Yiwen selects stocks based on low penetration and high growth, currently prioritizing AI sub-sectors like data collection, analytics, and B2B AI applications. Thanks to this differentiated strategy, CaTong Asset Management Innovation Growth has delivered significant alpha. Wind data shows that as of August 4, the fund’s one-year cumulative return was 62.63%, versus a benchmark of 14.85%—meaning it outperformed by over 4x. 03 The Performance-Redemption Paradox However, individual performance alone cannot quickly change investors’ overall perception of active equity funds. Behavioral finance highlights the "anchoring effect," where mental benchmarks influence decisions. While active funds grew rapidly in 2019-2021 and outperformed indices this year, many underperformed in 2022-2024. Considering entry points, some investors may have only just broken even. For those underwater for three years, "returning to par" is their anchor—selling at breakeven is a win. For distributors, the anchor is fund size retention. Due to active funds’ underperformance in 2022-2024, distributors faced pressure, shifting to steadier products like "fixed income+" and multi-asset strategies. Per Q2 data, "fixed income+" funds grew from RMB 1.38 trillion to RMB 1.48 trillion, while configurational FOFs also gained traction, supported by initiatives like China Merchants Bank’s Changying Plan. Their proven stability may sustain distributor focus. Meanwhile, institutional buying of ETFs like CSI 300 ETFs, led by Central Huijin, has cemented ETFs’ role in market stability and liquidity. During last year’s "9.24" rally, ETFs resurged as investors embraced this efficient tool. Fund houses are also competing via broader coverage, marketing, and lower fees, further diverting attention from active funds. 04 Epilogue Historically, active funds excel in capturing emerging industries—TMT in 2013/2015, blue chips in 2016-2017, new energy in 2020-2022, and biopharma this year. Unlike "quick-fix" index funds or rigid multi-asset strategies, active research requires time to bear fruit. As a whole, active funds thrive in identifying accelerating sectors. For instance, this year’s domestic AI and biopharma BD trends provided alpha opportunities. But trust rebuilds slowly. Investor habits ("sell at breakeven") and passive tools’s efficiency are shifting the industry from "star-driven" to "return-driven." As active funds rebound, more investors may recognize that proven skill is true alpha. Perhaps only when "return competition" fully replaces "size competition" will active funds’ spring take root in lasting trust. ### Related Stocks - [SSE Index (000001.CN)](https://longbridge.com/en/quote/000001.CN.md)