The financial landscape has been experiencing significant changes recently, particularly due to the central bank’s decision to adopt a moderately accommodative monetary policyThis shift has led to a decrease in risk-free interest rates, a development that has caught the attention of investors looking for stable, reliable returnsAs interest rates continue to fall, dividend assets are emerging as one of the most appealing investment choices, as they offer more stability compared to other high-risk assetsOne such investment that has stood out in this environment is the Guangfa Stable Strategy Fund, which has delivered an impressive return of over 27% in the past year, positioning itself as a top performer in the crowded field of equity funds.

The Guangfa Stable Strategy Fund is built around a dual approach that combines active stock selection with quantitative strategiesThis innovative strategy, designed by the fund’s management team, has proven to be highly effective in navigating the fluctuations of the financial market

Yang Dong, the fund manager, explained in an interview with Securities Times the importance of tailoring investment strategies to adapt to the changing market environmentThe Guangfa fund uses a top-down approach to select industries with high potential for excess returns, allowing the team to focus on high-potential sectors while reducing exposure to underperforming industriesAt the same time, the fund employs a subjective quantitative framework, which helps to refine the stock selection process by using a variety of sub-strategies, making the fund flexible and responsive to market conditions.

A major feature of Guangfa’s strategy is its robust quantitative framework, which helps to create sub-strategies tailored to specific market conditionsThis framework is supported by an advanced multidimensional evaluation system that assesses each sub-strategy's effectivenessYang Dong further elaborated on the role of artificial intelligence (AI) in the fund's stock selection process

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The use of AI allows the team to enhance its dividend stock pool by using nonlinear methods, creating a more diverse and robust selection of stocksThis innovative approach, which combines more than 20 different dividend style strategies, has enabled the Guangfa team to establish a more stable source of excess returns, even in times of market volatility.

The results of this strategy speak for themselvesAccording to data from Galaxy Securities as of December 13, Guangfa's performance ranks among the top 3% in terms of absolute returns among equity fundsThe fund achieved a return of 27.54%, significantly outperforming the CSI Dividend Index, which only saw an 11.83% increase, and the average of dividend-themed index funds, which posted a 17.79% returnThis remarkable performance underscores the fund’s ability to generate excess returns while navigating a volatile and unpredictable market.

To better understand the success of Guangfa's strategy, it is important to examine the broader market context

In the Chinese A-share market, 2023 has been characterized by significant fluctuations, with smaller stocks being hit hardest by market volatilityAt the same time, larger-cap stocks have maintained better liquidity, making them more appealing to investors seeking stabilityAfter the Chinese New Year, the market experienced a strong rebound, driven by themes such as artificial intelligence (AI), export supply chains, and high-growth sectorsIn this environment, Guangfa’s management team made strategic decisions to adjust the fund's portfolio, including reducing exposure to value stocks that were struggling with declining profitabilityAt the same time, they increased investments in high-dividend Hong Kong stocks and focused on A-shares with high dividend yields, aligning the portfolio with market trends.

By the second quarter of the year, the A-share market had split into two distinct camps: sectors with low volatility and low valuations, such as banking and utilities, continued to attract investor interest, while other sectors with higher valuations began to lose their appeal

Guangfa adapted its strategy by using AI-driven models to refine its stock selection, focusing on the fundamentals of the target stocks and assessing their potential for dividend growthThis refined approach paid off, with the fund posting an impressive 8.52% return in the second quarter, far outperforming the CSI Dividend Index, which showed a slight decline of -0.48%.

Despite the positive results in the first half of the year, the onset of the third quarter brought a wave of pessimism, which led to significant market declinesIn response, Guangfa’s management team adopted a cautious approach, holding their positions and focusing on undervalued dividend stocksThey used a combination of economic factors and price-volume metrics to identify stocks that were poised for a reboundThis careful, strategic positioning paid off as the markets rallied by the end of the third quarter, pushing the net asset value of the fund higher

This ability to remain calm and focused in the face of market turbulence highlights the strength of the Guangfa team’s strategy and its commitment to long-term success.

Industry experts have pointed out that domestic investors are increasingly seeking rapid performance growth in companies to elevate Return on Equity (ROE) and generate investment gainsHowever, as the broader economy shifts toward a focus on high-quality development, growth opportunities are becoming more limited, and the realization of that growth is becoming scarcerIn this context, dividend-paying assets, which offer consistent returns through dividends or share buybacks, are becoming an attractive investment optionThis shift towards dividend assets aligns with the broader trend of declining market interest rates, which have made traditional risk-free investments less appealing.

Dividend-themed funds, such as the Guangfa Stable Strategy Fund, have become particularly attractive to investors looking for reliable income streams

As interest rates continue to fall, these funds offer a stable and predictable source of returns, making them a key component of many investors' portfoliosThe Guangfa fund, with its combination of active stock selection and quantitative strategies, is well-positioned to take advantage of this trend and provide consistent returns for investors seeking stability in an uncertain economic environment.

In conclusion, the Guangfa Stable Strategy Fund has proven to be a highly effective investment vehicle in a volatile financial landscapeBy combining active stock selection with innovative quantitative strategies, including the use of artificial intelligence, the fund has been able to consistently deliver impressive returns, outpacing many of its competitorsAs the global economy continues to transition toward lower interest rates and more challenging growth conditions, dividend assets are set to become even more attractive