1. Report Industry Investment Rating No information provided in the report. 2. Core View of the Report The report focuses on the Bank of China CSI All - Share Free Cash Flow ETF, a passive index fund under the Bank of China Fund. The CSI All - Share Free Cash Flow Index, the underlying index of the fund, is a SmartBeta index that combines value and profitability. The index has advantages in terms of industry distribution, dividend yield, valuation, profitability, and performance. The ETF has achieved excess returns while closely tracking the index, and the current fund manager has rich experience in index fund management [1]. 3. Summary According to the Directory 3.1中证全指自由现金流指数：兼顾价值与盈利的SmartBeta指数 - **Index Introduction**: The CSI All - Share Free Cash Flow Index (932365.CSI) selects 100 listed company securities with high free cash flow rates to reflect the overall performance of securities of companies with strong cash - flow generation capabilities. It was based on December 31, 2013, with a base point of 1000 [6]. - **Component Stock Analysis**: The index has a balanced industry distribution, relatively concentrated in household appliances, non - ferrous metals, and transportation. Market capitalization is concentrated in small - and medium - cap stocks, with companies with a market cap of less than 100 billion accounting for 30% [11]. - **Dividend Yield Analysis**: The dividend yield of the index is between that of the CSI 300 and the CSI Dividend Index. As of November 14, 2025, it was about 3.83%, higher than the CSI 300's about 2.56% but lower than the CSI Dividend Index's about 4.22% [15]. - **Valuation Level**: The PE valuation has an advantage, and the high PB reflects high profitability. As of November 14, 2025, the PE - TTM was about 13.39 times, lower than the CSI 300's 14.24 times, and the PB - LF was about 1.94 times, higher than the CSI 300's 1.48 times [19]. - **Profitability Level**: The ROE of the index is expected to remain stable at around 14% from 2025 to 2027, higher than the CSI 300 (about 11%) and the CSI Dividend Index (about 9%). Net profit is expected to increase steadily from about 490 billion yuan in 2025 to over 560 billion yuan in 2027 [24]. - **Performance Analysis**: In the past nearly six years, the cumulative return of the index was 207.13%, with an annualized return of 21.98%, outperforming the CSI 300 and the CSI Dividend Index. It also had excess returns in multiple years and showed strong defensive capabilities in 2022. The Sharpe ratio was 1.02, indicating high risk - adjusted returns [28]. 3.2中银中证全指自由现金流ETF（563760）介绍 - **Product Introduction**: The Bank of China CSI All - Share Free Cash Flow ETF is a passive index fund under the Bank of China Fund. It was established on May 21, 2025, listed on June 6, 2025, with an issue size of 388 million yuan. It uses the full replication method for investment [33]. - **Excess Returns and Close Tracking**: Since its establishment on May 21, 2025, the ETF has achieved excess returns over its performance benchmark. The net value has been above the CSI Cash Flow Index. The average daily tracking deviation is under control, with the average absolute value of daily tracking deviation less than 0.05%, and the annualized tracking error in the statistical period was 1.23%, significantly lower than the control targets [35]. - **Introduction of the Current Fund Manager**: Mr. Zhao Jianzhong, a finance master, is the Assistant Vice - President of the Bank of China Fund. He has 10.45 years of investment management experience, has managed 19 funds in the past, and currently manages 13 funds, including various index products [42].

Core Viewpoint - The article discusses the implications of the China Securities Regulatory Commission's "Action Plan for Promoting the High-Quality Development of Public Funds," particularly focusing on the constraints of performance benchmarks for fund managers and the potential impact on their investment strategies and fee structures [1]. Group 1: Market Overestimation of Active Equity Funds' Underperformance - The market has overestimated the proportion of active equity funds that will underperform their benchmarks by 10% from 2022 to 2024, with 68.76% projected to face this issue, compared to only 1.05% from 2019 to 2021 [2]. - The first method of measuring this probability assumes fund managers do not adjust their benchmarks, which may not provide a reliable future reference due to historical negligence towards benchmarks [2]. - The second method assumes fund managers will align their benchmarks with broad indices like the CSI 800, but this also presents challenges as managers typically select benchmarks that suit their investment styles [5]. Group 2: Benchmark Selection Challenges - If fund managers choose broad indices like the CSI 300 or CSI 800 without altering their investment strategies, the probability of underperforming the benchmark by over 10% becomes uncontrollable [8]. - Fund managers face two choices: either align with broad indices and adjust their portfolios accordingly or select benchmarks that match their investment styles, effectively turning their products into "enhanced index funds" [8]. - The analysis shows that if managers select benchmarks aligned with their styles, the proportion of funds underperforming by 10% drops significantly from 47.82% to 22.34% [10][11]. Group 3: Short-Term Market Expectations - The market is currently estimating the gaps between fund allocations and benchmark indices, which may lead to short-term trading opportunities in certain sectors [19]. - Active equity funds are generally underweight in financials and traditional consumer sectors while overweight in technology and growth sectors, indicating a need for adjustments if broad indices are chosen as benchmarks [20][21]. Group 4: Benchmark Selection for Active Equity Funds - The article emphasizes the importance of selecting appropriate benchmarks for active equity funds, suggesting that the choice of benchmark should align with the fund manager's investment style rather than conforming to broad indices [29]. - Major index providers have developed a range of indices that cover various strategies, with broad indices like the CSI 300 and CSI 800 being the most commonly selected benchmarks [29][31]. - The article outlines that the characteristics of indices, such as industry distribution and stock selection methods, should be analyzed to ensure they reflect the performance of public funds accurately [40][43].

Core Viewpoint - The article emphasizes the importance of investment factors in selecting stocks and constructing investment strategies, highlighting that understanding these factors can lead to better investment decisions and potential returns [2][20]. Investment Factors Overview - The article introduces eight commonly used investment factors, each with distinct principles, applicable market conditions, and associated risks, which can help investors optimize their investment strategies [4][16]. Factor Summaries 1. Market Capitalization Factor - Focuses on the impact of stock size on returns, with large-cap stocks generally being more stable but less elastic, while small-cap stocks offer higher growth potential but come with increased risk [5][6]. 2. Value Factor - Concentrates on the discrepancy between a company's intrinsic value and market price, aiming to identify undervalued stocks for potential gains when market sentiment improves [8]. 3. Growth Factor - Evaluates a company's earnings growth and future potential, typically performing well in favorable economic conditions but facing higher risks during downturns [9]. 4. Low Volatility Factor - Selects stocks with stable prices and low volatility, providing better risk-adjusted returns, especially during market downturns [11]. 5. Dividend Factor - Targets stocks with stable dividends and high yield, offering defensive characteristics in volatile markets but may lag in strong bull markets [12]. 6. Quality Factor - Based on financial and operational metrics to identify high-quality companies, which may face valuation risks during periods of high market risk appetite [13]. 7. Momentum Factor - Utilizes the trend-following theory, capitalizing on stocks that have shown strong past performance, though it may struggle in volatile markets [14]. 8. Reversal Factor - Exploits price reversal opportunities, performing well in choppy or bearish markets but underperforming in strong trends [15]. Factor Usage Considerations - Investors should choose factors that align with their risk tolerance and investment goals, combining multiple factors to enhance returns while being mindful of market conditions [17][18][19].