Core Viewpoint - The strategy of free cash flow is emerging as a new investment choice amid low interest rates and increased market volatility, highlighting the importance of cash flow quality and potential policy benefits [1][2][15] Summary by Sections Free Cash Flow Definition and Importance - Free cash flow (FCF) is defined as the cash a company can freely use after meeting its operational and reinvestment needs, reflecting its financial health and profitability [3][4] - The calculation of FCF is crucial as it indicates the cash available for dividends, debt repayment, or new investments [3] Characteristics of Free Cash Flow Index - The free cash flow index is characterized by its focus on genuine profitability, avoiding manipulation through accounting practices, and ensuring sustainable returns for shareholders [5][6] - The index's selection criteria require constituent stocks to have positive operating cash flow for several years, enhancing its value attributes [6][7] Policy Impact and Market Trends - The "anti-involution" policy is expected to positively influence the index by optimizing supply and cash flow generation capabilities, aligning with the index's selection logic of high cash flow and low expansion [14][15] - The index's constituents are primarily from cyclical industries, benefiting from improved supply dynamics and price recovery, which enhances cash flow and profitability [14][15] Investment Appeal of Free Cash Flow Assets - The rise of free cash flow assets reflects a consensus on the importance of profitability quality, policy benefits, and long-term returns, driven by a shift in investor focus towards high-quality assets [16] - The low interest rate environment amplifies the attractiveness of free cash flow assets, as they offer better yield compared to traditional fixed-income investments [16] Fund Details - The newly launched fund, tracking the CSI All Share Free Cash Flow Index, aims to minimize tracking error and invest over 90% of its assets in stocks, with a focus on precise market opportunity capture [17]

Core Viewpoint - The rise of free cash flow strategies is becoming a new investment choice amid low interest rates and increased market volatility, highlighting the importance of real earnings quality and sustainable returns for investors [1][3][22]. Summary by Sections Definition and Importance of Free Cash Flow - Free cash flow (FCF) is defined as the cash remaining after a company meets its operational and reinvestment needs, indicating financial health and profitability [5][8]. - The calculation formula for FCF is: FCF = Net cash flow from operating activities - Cash paid for capital expenditures [5]. Characteristics of Free Cash Flow Index - The free cash flow index focuses on real earnings quality and has a more balanced industry and market capitalization distribution compared to traditional dividend indices [6][10]. - The index's selection mechanism requires constituent stocks to have positive operating cash flow for several consecutive years, enhancing its value attributes [9][12]. Policy Impact and Market Trends - The "anti-involution" policy is expected to positively influence the index by optimizing supply and demand dynamics, particularly benefiting cyclical industries like coal, agriculture, and chemicals [19][21]. - The index's focus on high cash flow and low expansion aligns with current policy trends, enhancing the quality and dividend capabilities of its constituent stocks [20][21]. Historical Performance and Risk Mitigation - Historical data shows that the index has achieved an annualized return of over 19% since its inception, with a Sharpe ratio significantly higher than that of the Shanghai and Shenzhen 300 Index [9][12]. - The index's design incorporates mechanisms to mitigate overfitting risks by ensuring a broad sample base and dynamic adjustment of selection criteria [16][17]. Investment Appeal - The appeal of high free cash flow assets is driven by their defensive characteristics in uncertain economic conditions, as evidenced by the index's performance during market fluctuations [22]. - The current low interest rate environment enhances the attractiveness of the index, as it offers a higher yield compared to government bonds [22]. New Fund Launch - A new fund tracking the China Securities All Index Free Cash Flow Index is being launched, aiming for minimal tracking error and significant investment in stocks [23].