The world of active equity funds has faced significant challenges recently, particularly highlighted by the sheer number of fund closures and failed fundraising attemptsAs of December 13, a striking 78 stock funds had been liquidated in 2023—an unprecedented figure in the history of publicly offered fundsFor instance, the Guolian Advanced Manufacturing fund, notable for its rapid turnaround, was established in July and shut down merely three months later due to a failure to maintain sufficient assets and investorsSimilarly, the Dongfang Xinyu Stable Hybrid fund announced its unsuccessful fundraising on December 13, marking it as the eighth failed fundraising attempt of the year.

This wave of fund liquidations reflects broader performance trends in the active equity fund sector, which is currently experiencing a stark divisionSome funds are thriving with lucrative returns, while others grapple with underperformance

As of mid-December, over 600 active equity funds had actually surpassed their peak values from early October, and nearly 100 of those saw returns exceeding 10%. This divergence prompts an essential question: What distinguishes the successful funds from those in turmoil?

Active equity funds have witnessed extreme shifts in their market conditions since the tumultuous backtracking of the investment landscape began in 2020. While a segment of these funds has faded from existence due to lackluster performance, others continue to showcase a robust ability to generate profitsThe conundrum revolves around the need for poorly performing funds to evolve while identifying ways to uphold their competitive edge amidst this volatility.

Examining the recent closures reveals a patternParticularly concerning is the fact that the active equity funds are not only facing harsh scrutiny but are also witnessing a chilling effect in new fund issuances

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Following the announcements by fund houses, the grim reality shows that the average size of single products is declining as the total scale of active equity funds continues to shrink.

The data from Dongfang Fund indicated that the Dongfang Xinyu fund had sought to raise capital since mid-September but failed to secure enough contributions by the December deadline required for the initiation of its fund charterThe fact that this fund was a mixed-asset vehicle—designed to invest between 10% to 30% in equities, including stocks, bonds, and convertible bonds—shows a shift toward diversified investment strategies, which unfortunately didn’t translate into desired results.

The overall atmosphere has become conducive to an environment where funds continuously liquidate due to decreased interest and market pressuresIn 2023, the cumulative count of closed funds reached 265—a significant increase from previous years, showcasing an upward trend in the number of fund closures across the entire spectrum

In stark contrast, only 40 funds were shut down in 2020.

Conversely, those struggling funds often adopt a one-dimensional strategy, adhering to the “investment tracks” that have previously yielded high profitsThe significant downturn in traditional investment sectors, compounded by macroeconomic headwinds, has rendered many of these previously lucrative strategies ineffectualAs these struggling funds still cling to outdated ideas that revolve around certain industries, they expose themselves to the inherent risks of market volatility.

Industry leaders emphasize that the essence of thriving in a changing market environment rests on flexibility and foresightOne fund executive expressed concern that many failing funds have not deviated from their chosen sectors, excessively concentrating their investments in areas like consumer goods, pharmaceuticals, and renewable energy—industries that have recently underperformed.

This reliance on historical performance indicators reflects a wider problem in the investment landscape

The collapse of major themes promoted previously, such as the popularity of certain sectors like liquor and new energy vehicles, indicates a need for diversification and adaptability among fund strategiesMany asset managers are finding themselves unable to adjust effectively to emerging investment opportunities.

Exploring the climate further reveals that while fund closures skew the perception of the entire active equity fund sector, several funds continue to thriveInnovation in management processes and more refined investment competencies are emerging as focal points for profitabilityNotably, the successful funds have adopted a model of improvement and evolution, where learning from past performances shapes future strategies.

Data suggests a continued momentum in valuations among some second-tier funds, particularly following a strong recovery in the A-share market in late September

Even though challenges ensued in the fall, a number of funds managed to elevate their net worth significantly—a clear sign that intelligent management and adaptive strategies can yield positive returns even in turbulent conditions.

Moving forward, the proactive approach remains crucialFor one, successful funds have maintained their edge by iteratively improving their investment philosophies, while those that have not performed well are urged to continuously adjust and fine-tune their methodsThis dynamic interplay could act as a catalyst for a shift back towards performance-driven growth in the sector.

Despite a prevailing undercurrent of negativity surrounding certain fund closures, there remains an abundance of promising opportunities within the sphere of active equity fundsIf fund managers and companies adapt their strategies, keep their fingers on the pulse of market fluctuations, and develop frameworks to foster diversification, the outlook for active equity investments could remain favorable even amidst the uncertainty.

In conclusion, the landscape surrounding active equity funds encapsulates a tale of two narratives—one of closures and missed opportunities alongside a story of innovation, recovery, and gains for the cautious