"Strong Benchmark" Solidifies Long-Term Return Foundation, Value Assets' Cost-Performance Ratio Becoming Increasingly Prominent

Founder of Xingzheng Global Fund FOF Fund Manager Liu Xiao The ultimate goal of the financial services industry is to create value for those served. “Value ultimately means helping investors make money, and ideally, providing a better experience and earning more.” Xingzheng Global Fund / Provided

Securities Times Reporter Chen Shuyu

“A good investment approach should be the one that helps investors earn the most money.” Liu Xiao, fund manager of Xingzheng Global Fund FOF, emphasized this philosophy multiple times in an interview with Securities Times. He believes that the value of investing is not in short-term gains, but in the long-term sense of achievement—truly allowing holders to secure their profits, rather than frequently entering and exiting amid net value fluctuations and ending up empty-handed.

Anchoring on a “Strong Benchmark” for Steady Enhancement

“Steadiness” is Liu Xiao’s hallmark. Take the Xingquan Antai Steady Retirement One-Year Holding FOF he manages as an example: by the end of 2025, the product’s A-shares have returned 15.34% over nearly three years, with a maximum drawdown of -5.29%, both ranking among the top in its category.

Regarding investment philosophy, Liu Xiao summarizes it as: selecting a “strong benchmark” with long-term investment value, and striving for relatively steady enhancement based on this. This enhancement is reflected in both returns and volatility. “We hope this enhancement can be sustained over the long term, rather than appearing quickly in the short term,” Liu Xiao said. This relates to the team’s investment style, but more fundamentally, it’s about ensuring investors can truly profit. In his view, the ultimate goal of the financial services industry is to create value for those served—“value ultimately means helping investors make money, and ideally, providing a better experience and earning more.”

“The setting of a ‘Strong Benchmark’ aims to solidify the foundation for long-term returns. Through yield enhancement strategies, we aim to outperform the benchmark, combined with volatility optimization to improve the holding experience, thereby reducing losses caused by frequent trading,” Liu Xiao explained.

When selecting funds, Liu Xiao values the consistency and stability of the fund manager’s investment style, whether value or growth, requiring a coherent methodology. He emphasizes verifying holdings and performance to avoid style drift. During discussions with fund managers, he focuses on the stability of their decision-making logic and framework to ensure the investment style can be maintained long-term.

This philosophy also results in Liu Xiao’s relatively low turnover rate. He summarized three main reasons to sell: when holdings deviate significantly from fundamentals and reach obvious overvaluation, to realize gains; if there is a change in the fund manager; or if the fund manager’s investment style undergoes significant change. “We prefer to buy assets that don’t require much adjustment, and avoid chasing hot sectors or switching styles based on short-term market changes.”

Building a Steady Foundation with Multiple Income Sources

Once the philosophy is clear, execution becomes key. Liu Xiao attributes his past performance to four levels: the excess returns contributed by carefully selected funds, supplementary gains from multi-asset allocation, increased returns from multi-strategy applications, and active deviations at key moments.

“The core part comes from the excess returns generated by our selected funds,” Liu Xiao said. This is one of the core capabilities of FOF products. Based on this, multi-asset allocation has become an important supplement to returns. Assets like gold, overseas bonds, and convertible bonds have all contributed positively over the past few years. In terms of multi-strategy, regular participation in strategies such as private placements, block trades, and discount arbitrage has also provided substantial absolute returns.

Within the asset allocation, active deviations at critical moments have also contributed to gains. For example, in Q3 to Q4 of 2024, he significantly increased the allocation to equities and especially raised the weight of Hong Kong stocks. This decision was based on observations of listed company behaviors. “At that time, the investment success rate in Hong Kong stocks was relatively higher, and there were clear buyback signals,” Liu Xiao explained. When stock prices are lower, companies tend to be more willing to buy back shares. As long as a company believes its market value is significantly below its intrinsic value, buybacks become the optimal capital allocation choice. In 2024, Hong Kong stocks experienced a rare large-scale buyback phenomenon. From Q2 2024 until the market clearly rebounded, he continued to increase holdings in Hong Kong stocks, and the subsequent market trend confirmed this judgment.

This micro-signal-based decision-making reflects his understanding of “investment value.” “We pay attention not only to static valuation but also to other dimensions,” he said. For example, a company’s buyback activity indicates that the company itself believes its stock is undervalued.

The Odds of Value Assets Are Increasing

Liu Xiao believes that understanding the current macro environment requires grasping the cumulative effects of residents’ savings behaviors. Initially, residents may increase savings due to a lack of clear investment directions, but after two or three years of continuous accumulation, the roughly 10 trillion yuan of new deposits each year will significantly boost cash reserves, creating a “safety cushion” psychologically, which may then promote a rebound in investment and consumption willingness. This is a common phenomenon when fundamentals bottom out and the credit cycle shifts from contraction to slow recovery. Currently, the market may be emerging from the bottom, with a clear upward trend expected.

Liu Xiao pointed out that “deposit shifting” does not necessarily mean large-scale direct inflows into the stock market; it may be residents gradually using deposits for consumption and reinvestment, which can drive PPI and CPI back to positive territory and improve corporate profits. As the performance of related stocks materializes and stock prices reflect this, a positive feedback loop could form, initiating a healthy cycle.

Based on this, he is gradually increasing the allocation to value and quality funds. He believes that many undervalued value assets are showing a higher risk-reward ratio, and as macro conditions recover and fundamentals bottom out, the probability of success is increasing. Therefore, he is gradually increasing positions on the left side of the valuation spectrum. Recently, he has been more focused on large-cap styles. Small-cap stocks performed well earlier but are now at relatively high valuation levels historically. He emphasizes that the advantage of FOF is its flexibility to allocate across all styles without limiting the selection universe.

Liu Xiao believes that the technology sector has completed a significant valuation correction, and future gains depend on earnings realization; in contrast, value assets are undervalued, and if they revert to reasonable levels along with earnings growth, their potential is greater. Regarding bonds, he does not rely heavily on credit strategies but maintains a certain duration to smooth volatility. Gold is used as a long-term risk hedge; short-term fluctuations may increase, but long-term allocation remains valuable.