On November 27th, the announcement of the issuance of shares for the Yangtze River CSI All Index Enhanced Initiated Securities Investment Fund was released, and the fund will begin its issuance work in December. During the same period, 14 index enhancement funds (hereinafter referred to as "index enhancement funds") including E Fund's CSI A500 Quantitative Enhancement Fund, Baoying CSI A500 Index Enhancement Fund, and Dacheng CSI 800 Index Enhancement Initiating Fund are currently being issued. Since the beginning of this year, the number of mutual funds has shown explosive growth. At present, the number of newly established index increase fund products within the year has reached 160, with a year-on-year growth of over 416%. In the eyes of the interviewees, various factors such as policy guidance and support, continuous improvement of the index system, and increasing investor demand jointly drive the rapid expansion of index funds. In the future, various public fundraising institutions need to be fully prepared to cope with the challenges brought by intensified competition on the track. As a tool type product that combines investment discipline and alpha ability, broad-based funds are increasingly favored by various investors. Since the establishment of the first publicly offered mutual fund in China in 2002, the scale of mutual funds has continued to grow. However, between 2002 and 2016, the number of newly established index funds was only in the single digits each year, and since then, development has gradually accelerated. Currently, the number of index funds on the market has reached 453. According to Wind Information data, as of November 27th this year, the number of newly established private placement fund products by public institutions reached 160, an increase of 416.13% compared to the same period last year, with a total fundraising amount exceeding 88.847 billion yuan. Tuo Hejiang, a researcher at Beijing Geshang Fuxin Fund Sales Co., Ltd., told Securities Daily reporters: "The development of private placement funds cannot be separated from policy guidance and support. The release of the Action Plan to Promote the High quality Development of Index based Investment in the Capital Market has promoted the development of index based products. At the same time, index companies continue to expand their sub indices and improve their index systems, providing more tracking targets for public institutions." In the view of Cai Dan, General Manager of Baoying Fund's Quantitative Investment Department, the significant increase in the number of newly issued private placement funds this year is the result of both supply and demand driven factors. From the supply side perspective, the Action Plan for Promoting the High Quality Development of Public Funds clearly proposes to "strengthen the constraint effect of performance comparison benchmarks" and "vigorously increase the scale and proportion of equity investment in public funds", which are conducive to the development of equity investment. The Zhizeng Fund itself has strict constraints on the proportion of constituent stocks and tracking errors, which can better benchmark performance and is a product that is very in line with regulatory policy guidance. From the demand side, in the era of low interest rates, the difficulty of preserving and increasing the value of funds has increased. Currently, deposit interest rates and money fund interest rates are continuously declining, and low-risk preference groups are facing the problem of "asset shortage". This year, the equity market has shown a strong trend, and institutional investors as well as some individual investors with medium to low risk preferences are willing to increase their allocation of equity assets. From the perspective of the direction of fund layout in the market, broad-based index is the main track. According to Wind Information data, there are a total of 272 index boosting products distributed around the four broad base indices of CSI 300, CSI 500, CSI A500, and CSI 1000, accounting for 60.04% of the total number. Cai Dan said, "Broad fund index funds have the value of bottom position allocation. On the basis of closely tracking the trend of the broad fund index, they will also strive to pursue excess returns. Therefore, most public institutions regard it as one of the main layout directions." The full tier public fund layout index fund market continues to develop, and more and more public institutions are participating in the layout of the index increase track. As of November 27th, 97 public institutions have deployed private placement funds, including top tier institutions and small and medium-sized institutions. There are both similarities and differences in the layout of private placement funds between top institutions and small and medium-sized institutions. Cai Dan said, "Wide base index funds are the core layout varieties of many public institutions. The wider the coverage and greater the internal differentiation of wide base indices, the easier it is to obtain excess returns. However, it is more difficult to achieve stable excess returns for industry theme and style indices. Different from this, top institutions usually layout in the direction of 'big and comprehensive', and small and medium-sized institutions may need to combine their company's resources and their own investment and research advantages to select varieties for layout." Tuohe Jiang believes that in terms of product strategy, top institutions and small and medium-sized institutions have different ways of obtaining competitive advantages. The top institutions mainly layout large-scale, low fee, and high liquidity value-added products, while small and medium-sized institutions enhance product recognition through active enhancement strategies and thematic focus. At the same time, top institutions consolidate their advantages through "full product line coverage+scale effect", while laying out innovative products to build an ecosystem. Small and medium-sized institutions engage in differentiated competition through "precise positioning of emerging tracks+quantitative strategy innovation", seeking opportunities in segmented fields. The booming development of private equity funds is both an opportunity and a challenge for public institutions. Cai Dan analyzed that "currently, opportunities far outweigh challenges. In terms of opportunities, the proportion of equity funds in the current index growth fund is still relatively small, and policy support has given index growth funds long-term development space. In terms of challenges, various institutions are laying out the index growth track, and ultimately competing for the excess return level of products." In the future, all public institutions need to be fully prepared to cope with the challenges brought by intensified competition in the track. In Cai Dan's view, the more products are laid out for the same benchmark index, the more intense the competition will be, and in the long run, it may gradually compress the excess return space. Institutions need to be well prepared in terms of channels and investment research. On the channel side, it is necessary to provide good investor guidance and education, strengthen the long-term allocation value of core broad-based index varieties, and increase recommendation efforts when valuations are relatively appropriate; On the investment research side, it is necessary to increase talent reserves. Based on in-depth research on traditional fundamental data, volume price data, etc., research on alternative factors and strategies should be increased. Through internal diversification and differentiation strategy allocation, long-term stable excess returns should be pursued. On the one hand, top institutions dominate the layout of broad-based index based products with their scale advantages, while small and medium-sized institutions need to further focus on emerging broad-based indices and thematic indices to build a differentiated product matrix. On the other hand, as the homogenization of quantitative strategies intensifies, the excess returns of traditional multi factor models tend to converge, and institutions need to build more intelligent and robust enhancement systems to enhance the sustainability of excess returns. ”Tuohejiang said. (New Society)