Core Viewpoint - The article emphasizes the importance of using appropriate performance benchmarks for funds, highlighting that many funds currently use price indices, which may misrepresent their performance compared to total return indices [1][22][49]. Group 1: Investment Returns - Investment returns primarily come from three components: price returns, dividend returns, and reinvestment returns [3][4][5]. - Price returns reflect market price changes, while dividend returns include cash earnings from stocks and bonds, and reinvestment returns generate additional earnings through compounding [3][4][5]. Group 2: Impact of Dividends on Returns - The difference in returns between price indices and total return indices is significant; over the past 20 years, the annualized return for the CSI All Share Total Return Index was 10.84%, compared to 9.31% for the price index [15]. - In bond investments, the annualized return for the CSI Comprehensive Bond Wealth Index was 4.19%, while the net price index only yielded 0.39% [15]. - The contribution of dividends and reinvestment to total returns is substantial, accounting for approximately 30% of stock investment returns and over 90% of bond investment returns over the past 20 years [19]. Group 3: Inappropriate Benchmark Selection - Approximately 75% of funds use price indices as their performance benchmarks, which is inappropriate since fund returns are essentially total returns [22][25]. - The issue is particularly pronounced in equity and mixed funds, with almost no funds using total return indices as benchmarks [25]. Group 4: Lowered "Passing Line" - Using price indices as benchmarks lowers the difficulty of outperforming the benchmark, creating a misleading perception of fund performance [30]. - For instance, 68% of actively managed equity funds outperformed the CSI 300 price index over the past five years, but this figure dropped to 55% when using the total return index [30]. Group 5: "Inflated" Excess Returns - Many index funds and ETFs appear to generate excess returns compared to their benchmarks, but this is largely due to the use of price indices, which overlook dividends and reinvestment [37][40]. - If benchmarks were switched to total return indices, many funds' reported excess returns would significantly decrease or even disappear [40]. Group 6: Need for More Standardized Benchmark Usage - The article calls for the industry to adopt total return indices as performance benchmarks to provide a clearer and more objective assessment of fund performance [49][50]. - The current regulatory focus aims to enhance the role of performance benchmarks in determining product positioning, clarifying investment strategies, and measuring performance [49][50].

Core Insights - Over 180 funds have adjusted their benchmarks as of October 31, 2023, moving towards clearer investment strategies and styles [1][2] - The new guidelines for public fund benchmarks aim to enhance comparability and accuracy in performance evaluation [1][4] Fund Benchmark Adjustments - The number of funds changing their performance benchmarks since 2025 is 183, with over 70 changes occurring after the release of the "Action Plan for Promoting High-Quality Development of Public Funds" in May 2023 [2] - Many funds are shifting from broad indices to more specific industry indices, such as a sports culture fund changing its benchmark from the CSI 300 to a combination of industry-specific indices [2][3] Focus on Full Return Indices - Current research indicates that nearly 75% of domestic fund benchmarks are price indices, with very few using total return indices, which account for dividends and reinvestment [5][6] - The annualized returns over the past 20 years show a significant difference between total return indices and price indices, highlighting the importance of using full return indices for accurate performance comparison [5][6] Need for Enhanced Benchmark Management - The adjustment of benchmarks is seen as a necessary step towards more refined management, with a focus on improving the comparability of benchmarks [4][7] - Factors to consider for effective benchmark management include risk-return characteristics, strategy alignment, transparency, and market representation [8]

Core Viewpoint - Understanding the performance benchmark of mutual funds is crucial for investors to establish a rational investment perspective, as it conveys important information about the fund's investment direction, style, and strategy [1][2]. Group 1: Importance of Performance Benchmarks - The regulatory framework has elevated the significance of performance benchmarks in mutual funds, guiding product positioning, investment strategies, and performance evaluation [1]. - Performance benchmarks help investors identify the investment focus and style of funds, such as large-cap blue-chip stocks or specific sectors like semiconductors [2][3]. - Composite benchmarks, such as a mix of equity and bond indices, indicate a balanced investment strategy, while more complex benchmarks reflect specific asset allocation strategies [3]. Group 2: Evaluating Fund Performance - Performance benchmarks serve as a tool to filter market styles and assess the true management capabilities of fund managers, allowing for a more accurate evaluation of their performance [3][4]. - For actively managed funds, deviations from benchmarks can indicate attempts to achieve excess returns, while passive index funds rely heavily on accurately tracking their benchmarks [4]. - The introduction of floating fee structures linked to performance benchmarks ensures that investors pay for value, with fund managers receiving higher compensation only when they outperform the benchmark [4]. Group 3: Analyzing Fund Selection - Investors should analyze benchmarks to determine if a fund aligns with their preferences, considering the composition of the benchmark and its implications for risk and return [5][6]. - The choice of benchmark is critical; funds using price indices rather than total return indices may mislead investors regarding their true performance and management effectiveness [6]. - Adjustments to performance benchmarks may occur as funds change their investment focus, necessitating investor awareness of such changes to ensure alignment with their investment goals [7].

Group 1 - The core viewpoint emphasizes the importance of adhering to a long-term investment strategy focused on high dividend assets, considering quality factors, avoiding crowded trades, and paying attention to expected dividends [1] - High dividend strategies yield returns from both capital gains and dividend income, primarily involving mature companies with strong cash flow and high return on equity (ROE), which tend to distribute profits as dividends [1][2] - The report identifies mainstream high dividend indices, including pure dividend indices and Smart Beta strategies, highlighting their differences in weighting methods, sample constraints, and industry distribution [1] Group 2 - There are three key misconceptions about high dividend strategies: they can outperform the market in various market conditions, interest rate changes have a limited impact, and short-term gains post-dividend distribution are often less than 50% [2] - "Cash cow" companies are defined by their stable cash flow, which is influenced by their business model, resource allocation, and profitability drivers [2] - Different asset and liability structures create four types of cash cow paradigms, with heavy asset industries relying on scale and quality, while light asset industries depend on brand and channel efficiency [3] Group 3 - Investing in cash cows requires understanding their business model and industry cycle, with defensive characteristics across different paradigms [4] - The optimal investment timing is during the transition from growth to clearing phases in the industry cycle, focusing on fundamental leaders within the respective paradigms [4] - True cash cows exhibit resilience across cycles, and long-term investments should prioritize strong business models and reasonable forward valuations [4]

Strategy Overview - The report highlights that the Shanghai Composite Index has surpassed the 3500-point mark, primarily driven by strong performance in the financial sector and expectations surrounding the "anti-involution" policy [1][2] - For the index to advance further, the effectiveness of incremental policies such as "anti-involution" needs to be demonstrated [2] Market Sentiment - There is a notable psychological focus on the 3500-point threshold, which may lead to passive selling by quantitative funds when this integer level is reached [2] - The report suggests downplaying the emphasis on the index's integer levels and instead focusing on the total return index, which better reflects the true performance of the Shanghai market [2] Financial Sector Contribution - As of July 8, the Shanghai Composite Index has recorded a year-to-date increase of 4.2%, with the financial sector contributing 2.8% to this growth [2][4] - The strong performance of bank and insurance stocks is identified as a core reason for the index's ability to reach the 3500-point level [2] Trading Volume Considerations - The report discusses the importance of trading volume in maintaining the index above 3500 points, suggesting that the focus should be on the financial sector's index performance rather than overall market trading volume [2] - Historical trends indicate that the banking sector's index benefits from incremental capital flows, with a stable trading volume leading to gradual price increases [2] Policy Impact - The "anti-involution" policy, as defined in the sixth meeting of the Central Financial Committee, is expected to aid in macroeconomic structural adjustments and improve pricing factors, which could facilitate a classic market structure of "weight lifting and technology growth" [2] - This structure is anticipated to help the index achieve a "two steps forward, one step back" effect, leading to an upward shift in the market's central tendency [2] Sector Rotation and Investment Focus - The report notes a rapid rotation among sectors, with high absolute readings in sentiment indicators, suggesting a dual constraint of "upside risk" and "drawdown control" [2] - It recommends focusing on relatively undervalued technology growth sectors for potential investment opportunities [2]