Core Viewpoint - The article discusses the evolution and trends in Fund of Funds (FOF) investment, emphasizing the importance of multi-asset and multi-strategy configurations in portfolio construction, as well as the significance of fund selection and investment objectives in achieving stable returns [2][10]. Group 1: Portfolio Construction - The importance of asset allocation is well-known, with classic investment theory suggesting that 90% of fund performance comes from asset allocation. However, many domestic investors initially understood asset allocation as merely the proportion of equities, bonds, and cash, which requires high foresight and predictability [4]. - The diversification of investment tools has allowed for a more mature multi-asset allocation environment in China since 2022, with an increasing number of tools available for FOF investment, including QDII funds and commodity funds [4][5]. - A key aspect of multi-asset allocation is to maintain low correlation between different asset classes, ideally negative correlation, to enhance net value stability. However, investors should be cautious of sudden high correlations during extreme market conditions [7]. - A new direction in asset allocation is multi-strategy configuration, which has been effectively applied in quantitative private equity. This approach combines various effective strategies to achieve more stable excess returns [7][8]. Group 2: Fund Selection - The two main pillars of FOF investment are asset allocation and fund selection. Despite the increasing importance of asset allocation, the significance of fund selection remains high. The ability to select funds is fundamentally about acquiring the alpha capability of fund managers [11]. - The alpha capability of excellent fund managers has shown a trend of recovery since 2025, with active management of public equity funds significantly outperforming mainstream market indices [11][12]. - When assessing a fund manager's alpha capability, it is crucial to separate industry beta and thematic beta, as these represent structural risks rather than true alpha [12]. Group 3: Investment Objectives - Common investment objectives for public funds include pursuing absolute returns, outperforming benchmarks, and leading in peer rankings. Each of these objectives holds different importance for investors, managers, and peer institutions [15]. - Absolute return is considered the ultimate goal for any investment product, especially after recent market fluctuations. Regulatory bodies have begun to suggest that average absolute returns should be a key performance indicator for fund managers [16]. - Outperforming benchmarks is essential for establishing trust with investors and is a core competency for fund companies. Recent market changes have highlighted the need for funds to consistently exceed benchmarks to ensure healthy industry development [17][18]. - Leading in rankings should not be an explicit goal, as it can lead to herd behavior among fund managers. Instead, focusing on absolute returns and benchmark outperformance will naturally result in favorable rankings over time [19].