Core Viewpoint - The small and mid-cap strategy has become a hot topic in quantitative investment this year, particularly with the small-cap index strategies gaining significant attention in the market [1][2]. Group 1: Performance of Small and Mid-Cap Strategies - Several leading quantitative private equity firms have reported annual returns exceeding 20%, with some reaching as high as 30%, showcasing impressive excess returns [2][5]. - The average return for quantitative private equity firms managing over 10 billion yuan was 13.54% in the first half of the year, with all firms achieving positive returns [5]. - The CSI 2000 index has seen a year-to-date increase of 16.41%, significantly outperforming other indices, indicating a strong performance of small-cap stocks [4]. Group 2: Factors Driving the Popularity of Small and Mid-Cap Strategies - The market environment has been conducive for small-cap strategies, with increased volatility providing ample trading opportunities [7]. - Current policies favoring "new productive forces" such as low-altitude economy and AI applications have positioned small-cap companies as key players in industrial innovation [8]. - The integration of AI in quantitative investment has enhanced strategy resilience and efficiency, particularly in factor discovery and portfolio optimization [9]. Group 3: Risks and Adjustments in Strategy - The rapid increase in valuations of small-cap stocks raises concerns about the sustainability of the small-cap strategy, as many stocks are now considered overvalued [11][12]. - Some quantitative private equity firms are optimizing their strategy models and tightening risk exposure in response to the crowded small-cap space [12]. - The current price-to-earnings ratio of the CSI 2000 index stands at 135.1, indicating that valuations are higher than 95% of historical levels, which could lead to significant pullback risks if market conditions change [12].

Core Viewpoint - The small and mid-cap strategy has become a blue ocean for quantitative investment in 2023, particularly with the small-cap index enhancement strategy gaining significant attention in the market [1][4]. Group 1: Performance of Quantitative Private Equity - Several leading quantitative private equity products have achieved annual returns exceeding 20%, with some even reaching 30%, showcasing impressive excess returns [2][6]. - The average return for quantitative private equity firms with over 10 billion in assets reached 13.54% in the first half of the year, with all firms reporting positive returns [7][8]. Group 2: Market Dynamics and Strategy Shifts - The market has seen frequent style rotations since September 2024, with small and mid-cap stocks outperforming large-cap stocks, leading to a significant increase in the allocation of small-cap stocks by quantitative strategies [5][12]. - The CSI 2000 index has risen by 16.41% this year, significantly outperforming other indices, indicating a strong focus on small-cap stocks [5][6]. Group 3: Factors Driving Small-Cap Strategy Popularity - The small-cap strategy's success is attributed to a combination of market conditions, funding preferences, and technological advancements [10][11]. - The current market environment, characterized by wide fluctuations and increased stock volatility, provides ample trading opportunities for quantitative strategies [12]. - Supportive policies for "new productive forces" have made small-cap companies attractive for innovation, leading to a preference for high-tech, stable-return quantitative strategies [12][13]. Group 4: Risks and Adjustments - As small-cap stock valuations rise rapidly, the sustainability of the small-cap strategy faces challenges, with some quantitative firms tightening risk exposure and optimizing strategy models [3][15]. - The CSI 2000 index's price-to-earnings ratio stands at 135.1, indicating that current valuations are higher than 95% of historical levels, raising concerns about potential market corrections [16][18]. - Some quantitative firms have begun to diversify factors and reduce strategy homogeneity to maintain effective and stable returns amid increasing competition [18][19].