1. Report Industry Investment Rating No industry investment rating is provided in the report. 2. Core Viewpoints of the Report - Free cash flow (FCF) is an important indicator in corporate financial analysis and value assessment. Abundant and sustainable FCF is the fundamental guarantee for corporate value distribution and growth [4]. - China's public - fund market is accelerating the layout of FCF - related products. As of March 28, 2025, 17 fund companies have declared 36 related products [4]. - Domestic FCF indices have shown significant excess returns compared to their benchmarks over the past decade, with distinct characteristics in industry allocation, market - value distribution, and valuation [4]. - The US ETF market has a rich variety of "cash - flow" strategy products. Single - factor and multi - factor strategy products related to FCF have large scales, and new products with innovative strategies are emerging [4]. 3. Summary According to the Table of Contents 3.1 Free Cash Flow Strategy's Investment Connotation 3.1.1 Concept and Underlying Philosophy of Free Cash Flow - FCF is the remaining cash flow available to all capital providers after a company meets its reinvestment needs from core operations. There are two ways to calculate it, and the latter is easier for quick estimation [8][9]. - FCF can accurately measure a company's sustainable internal cash - creation ability, reducing the impact of accounting treatments. It is crucial for corporate strategic and financial decisions [12][13]. 3.1.2 Layout of Free - Cash - Flow Products in China's Public - Fund Market - As of March 28, 2025, 17 fund companies have declared 36 FCF - related products, mainly ETFs. These products mainly track 5 indices, all using "free - cash - flow yield" as the core selection and weighting criterion [4][17]. - After the launch of FCF ETFs, their share has been increasing. There are currently 4 products under issuance or awaiting issuance, and most of the others are in the material - correction or feedback stage [18][19]. 3.2 Domestic Free - Cash - Flow Index Analysis 3.2.1 Compilation Rules of Free - Cash - Flow Indices - Five domestic free - cash - flow indices have similarities, such as using "free - cash - flow yield" as the core selection and weighting criterion, excluding financial and real - estate stocks, and having requirements for earnings quality. They also have differences in stock - selection space, component quantity, and screening requirements [21][22][24]. 3.2.2 Performance of Free - Cash - Flow Indices - Over the past decade, free - cash - flow indices have had significant excess returns compared to their benchmarks. In slightly rising or falling markets, the excess returns are more prominent. In the short - term, the performance of FCF factors has been poor, but in the long - term, they have better risk - return ratios and stronger anti - risk abilities [28][33][38]. 3.2.3 Industry Allocation Characteristics of Free - Cash - Flow Indices - Free - cash - flow indices generally over - allocate energy and consumer industries and under - allocate technology and other growth industries. They have high industry concentration, with the sum of the top three industries' weights exceeding 40% [40]. 3.2.4 Market - Value Distribution Characteristics of Free - Cash - Flow Indices - The components of the Guozheng Free - Cash - Flow Index and the CSI Cash - Flow Index are mainly concentrated in small - and medium - cap stocks, while the 300 Cash - Flow and 800 Cash - Flow Indices are more concentrated in ultra - large - cap stocks compared to their benchmarks [46][49]. 3.2.5 Valuation Characteristics of Free - Cash - Flow Indices - Free - cash - flow indices mostly have lower PE and higher PB than their benchmarks, indicating high earnings - quality requirements. Their dividend yields are also higher than those of the benchmarks [51][53]. 3.3 Development and Current Situation of "Cash - Flow" Strategy ETF Products in the US Market 3.3.1 Development of Free - Cash - Flow - Related ETF Products in the US Market - There are 42 free - cash - flow - related ETF products in the US market, including passive and active ETFs, single - factor and multi - factor strategy products, and ETF - FOF products. Single - factor and multi - factor strategy products have large scales [55][56]. - Early products used "cash flow" as one of the fundamental factors, while products with "free cash flow" as the core selection strategy emerged later but developed rapidly. Products have become more diverse and innovative [60][61][62]. 3.3.2 Product Layout of Representative Companies - Pacer's Cash Cow ETFs series focuses on using FCF to select companies with stable finances and high - quality profitability. It is divided into value and growth series, covering multiple regions and asset classes [66][69]. - Schwab Fundamental ETF series incorporates the cash - flow dimension into a diversified stock - selection system. It covers the US and international markets, and its representative products have large scales and good performance compared to benchmark value indices [81][84]. 3.3.3 Innovative Development of Free - Cash - Flow Factors - In single - factor strategies, products have evolved from focusing on historical FCF to considering both historical and expected FCF, and from focusing on absolute FCF to FCF growth sustainability [90][94]. - In multi - factor strategies, products add growth factors to address the limitations of FCF factors. Actively managed products based on FCF models have also gained market recognition, and FCF - based hedging - strategy ETFs have advantages in different market environments [96][99][104].