How to Hold Steady and Sleep Soundly: Three Common Traits Hidden in Anti-Drop Funds

Securities Times Fund Research Institute Kuang Jixiong

Since March, the A-share market has continued to fluctuate and adjust, with the average return of active equity funds falling about 6.6%. Five funds have declined over 20%, putting investors’ experience with these funds under significant pressure. The Securities Times Fund Research Institute attempts to cut through the data fog to analyze how to identify high-quality funds that investors can “hold on to and sleep well” during turbulent markets, providing a rational practical guide for long-term allocation.

Three Common Traits of Low-Drawdown Funds

In the context of recent widespread market declines, a group of active equity funds has shown remarkable resilience. Data shows that as of March 20 (the same below), among active equity funds established before the end of 2025, about 4.7% had positive returns since March. Notably, 21 funds such as Huian Industry Leader A, Huian Hongyang Three-Year Holding, and Huian Balanced Selection A performed well, with maximum drawdowns since March kept within 2%. Bo Shi Times Era Leading A, with a minimum drawdown of 0.68% and a return of 1.25%, became a benchmark for resilience among equity funds during the same period, offering investors a significantly better experience than peers. Deep data analysis of these resilient pioneers reveals that their steady performance is not accidental but has clear, identifiable common features.

First, diversification is the primary characteristic helping these funds resist volatility. The 21 low-drawdown funds have an average concentration of only 0.04% in their investments by the end of 2025, significantly lower than the 0.11% average of similar funds. A more diversified portfolio can effectively reduce the impact of single holdings’ fluctuations on the overall fund, helping net asset values stay stable during market adjustments and avoiding sharp declines caused by concentrated exposure to individual stocks or sectors.

Second, a low valuation margin of safety is central to their steady performance. These funds’ top holdings by the end of 2025 have an average price-to-earnings ratio of about 10 times, far below the 44.23 times average of similar funds’ holdings; their average price-to-book ratio is 1.63, also much lower than the 5.14 times average of peers. Huian Hongyang Three-Year Holding is a typical example, with its top ten holdings mainly in transportation and utilities sectors. Its low valuation and high dividend characteristics demonstrate strong defensive qualities during market adjustments. Since March, its top ten holdings have increased by over 6%, providing a solid foundation for net asset stability.

Third, the experience and maturity of fund managers are key to resilience. The managers of these funds have an average of over 9 years of experience, having gone through two full bear markets in 2018 and 2022. Their investment frameworks have been tested through cycles, and their styles remain stable. They generally adhere to contrarian and balanced strategies, avoiding chasing short-term hot topics, with turnover rates significantly lower than industry averages. Last year’s first-half average turnover rate for these 21 equity funds was 92.54%, well below the 214.68% of similar funds at the same time.

Data shows that these 21 low-drawdown funds have an average return of 2.51% since March, while the average drawdown of similar funds was 6.94%. The stark contrast indicates that products emphasizing risk control and holding experience are better at protecting investor returns during market adjustments.

Five Dimensions to Select “Comfortable” Funds

Short-term resilience may simply reflect a fund’s timing with the market, but to consistently provide a “comfortable” holding experience amid bull and bear cycles, a fund’s overall strength in “risk control, steady returns, and strong recovery” is essential.

If we extend the observation period from January 1, 2021, to March 20, 2026 (about five years), during which the market experienced a complete cycle from core asset consolidation to deep correction and then to oscillating recovery, this period serves as a “touchstone” for testing fund quality. The Securities Times Fund Research Institute uses strict criteria: maximum drawdown less than 10% over the past five years, Calmar ratio greater than 1, recovery days from maximum drawdown within 60 days, annualized volatility below 10%, and profit percentage over 60%. From all active equity funds established before the end of 2021, only 14 funds meet all these standards, accounting for less than 0.5% of the total, representing truly resilient funds capable of crossing cycles.

Comparing these 14 “comfortable” funds with active equity “high-volatility” funds (maximum drawdown ≥50% over five years), the difference in holding experience is stark.

Data shows that some high-volatility funds, despite seemingly attractive long-term compounded returns, suffer from poor holding experiences, making them hard to hold. For example, in the first quarter and third quarter of 2022, when the Shanghai Composite Index fell over 10%, the maximum net redemption ratio for the 14 “comfortable” funds did not exceed 20%. In contrast, funds with maximum drawdowns over 50% in the past five years had maximum net redemption ratios exceeding 90%. This huge contrast vividly illustrates that excellent holding experience can effectively break the negative cycle of “decline—panic—redemption—loss,” encouraging investors to stay committed during turbulence.

Three Key Indicators to Build a Fund Portfolio

If, at the beginning of 2021, you allocated equal amounts to these 14 “comfortable” funds, by March 20, the portfolio’s return would reach 29.27%, with a maximum drawdown of less than 4%. In comparison, the Wind All-Stock Mixed Fund Index returned only 2.24% over the same period, with a maximum drawdown exceeding 40%. This demonstrates that in the A-share market, excellent risk control is itself the strongest alpha.

To replicate this “steady happiness” in your own portfolio, investors can set three strict criteria to build a “high success rate, low pain” core pool: First, drawdown threshold—exclude funds with any annual maximum drawdown over the past three years exceeding 20%, to avoid deep pitfalls and maintain psychological resilience during extreme markets; second, recovery ability—prioritize funds with maximum drawdown recovery days under 90, testing their resilience and efficiency to quickly “bounce back” after declines, shortening the pain period and preventing irrational redemptions; third, win rate threshold—strictly select funds with a profit percentage over 60% in the evaluation period, using a “small steps, quick wins” approach to ensure a high probability of positive returns at any time, fostering a long-term mindset of “holding on and sleeping well.”

It’s worth noting that all 14 of these “comfortable” funds are flexible allocation funds. This is no coincidence; their mechanism advantages allow them to be both offensive and defensive. This also suggests that ordinary investors can adopt an optimized “core-satellite” strategy: allocate most funds to “core” low-volatility, high-success experience funds to establish a stable foundation, ensuring positive psychological feedback in any market environment; then allocate a smaller portion to high-elasticity sector or thematic funds to seek excess returns. This structure avoids the “roller coaster” pain of full high-volatility positions while maintaining opportunities to participate in market hot spots—an optimal balance between human weakness and market opportunity.

(Chief Editor: Guo Jiandong)

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