How Does The Index Enhancement Fund Carry Out "Enhancement"?

Recently, the market rebound on the market is expected to heat up gradually. Whether the market has hit bottom or rebounded and the gem has approached the bottom of history has attracted market attention.

At this time, it is a good choice to choose index funds for one-off investment or fixed investment.

Before I discussed with you, there are many index funds that follow different targets, such as the Shanghai and Shenzhen 300 index, the China Securities Index 500, the gem index and so on.

In index funds, there is another kind of index enhancement fund. So how can the index enhancement fund enhance its effectiveness? If it can enhance (winning index), does it mean that it may also weaken (lose the index)? Everything is positive and negative, so this idea is also logical.

Is it an index fund or an index enhancement fund?

In order to achieve the close tracking of the index, the index fund will have high position replication index, such as a Shanghai and Shenzhen 300 Index Fund. According to the fund data, the index fund is invested in the Shanghai and Shenzhen 300 index "not less than 80% of the stock assets", some are "not less than 90%", but generally it will reach about 95%. Otherwise, the deviation degree will be larger, and the effect of "perfect copy index" can not be achieved.

Enhanced

Usually, in the majority of fund assets follow the index, retain a small part of the fund assets to make active investment, and try to beat the market by actively increasing the expected annual yield of this part of the assets.

Many enhanced foundations adopt quantitative investment strategies, while increasing profits while controlling risks. After all, rising is a good thing. It also prevents Xiao He from losing Xiao He.

What kind of fund performs better? From the data point of view, the performance of enhanced index funds is indeed better than that of completely passive index funds.

Take the Shanghai and Shenzhen 300 index fund as an example: as of June 7th, 18 Shanghai and Shenzhen 300 index funds (A/C share, the same below) grew 6.17% on average since the beginning of this year, and 12 enhanced the average yield of index funds 6.80%.

In the medium to long term, the enhanced funds also outperform the index funds.

Near the top of the market in 2015 nearly 2nd anniversary, the overall decline in the enhanced fund is also smaller, showing a better overall.

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Small enhancement factors can accumulate earnings, but slight weakening factors can also lead to losses. In the enhanced index base, we do not exclude the phenomenon that some enhanced index funds are lagging behind the tracking index.

The excess returns or backwardness benchmarks of the enhanced index funds are closely related to the factor validity of the stock market characteristics and quantitative models.

This is mainly due to the matching degree of market style and factor, and the significance of some factors may not be particularly strong in a certain period.

The contribution to excess earnings is mainly determined by the style characteristics of market operation and the effectiveness of corresponding factors.

In different market styles, the contribution of different quantitative models is also different.

The data also showed that over time, the proportion of funds that increased the index fund's excess positive return also fluctuated. Among them, the 1 year enhanced index fund accounted for the highest proportion of abnormal return, reaching 80%, and the 3 and 5 years were 69.7% and 75% respectively.

The fund managers of Wells Fargo think that this may be due to the adaptability of the factor to the long-term adaptability and the characteristics of the current market.

Excess of 1 years

Higher, most likely related to the general application of quantitative tools in 2016. The quantitative models in previous years are relatively simple and the data are relatively limited. With the rapid development of the quantitative fund in 2016, many companies are equipped with quantitative teams, and the understanding of the quantitative investment field is deepened. The characteristics of the market turbulence are also more in line with the quantitative method of decentralized shareholding, so the related funds also show more excess returns.

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