Market style is a focus; how Huatai-PineBridge is positioning three types of enhancement strategies on the CSI 300

March’s market somewhat resembles the phrase from the “World Famous Songs” March piece, “Misty Southern Rain.”

Amid the U.S.-Iran standoff at the Strait of Hormuz, risk aversion sentiment is dissipating during pullbacks, funds are seeking destinations amid volatility, and investors are focusing not only on soaring stocks but also on more resilient assets.

Within A-shares, the relative resilience of the CSI 300 compared to small and micro caps is also noteworthy.

However, below the CSI 300, there are many products. Just among index-enhanced products, there are various types, and their enhancement logic differs. Some use Smart Beta to modify the index, some rely on quantitative models to pursue stable excess returns, and others leverage active research systems to enhance fundamentals within broad-based frameworks.

Currently, Harvest Fund’s layout in CSI 300 index-enhanced products is undoubtedly diverse and rich, covering all three major types, providing a valuable sample for analysis.

Anzhong Dynamic: Seeking Excess Returns Through Industry Allocation

If we break down Harvest’s CSI 300 enhanced product line, the most distinctive one is the CSI 300 Anzhong Dynamic Strategy (A-shares: 000368.OF, C-shares: 018947.OF).

It is neither a traditional passive index fund nor a common quantitative index enhancement, but a “regulated active enhancement” product that lies between the two. In a sense, it directly incorporates part of alpha sources into the index construction framework.

Its tracking index, the CSI 300 Anzhong Dynamic Strategy Index (H30124.CSI), is itself a design with high recognition. Simply put, this index does not fully replicate the market-cap weighting of the CSI 300 but is constructed in two parts:

• 70% as a “core holding,” equally weighted across 10 primary industries (financials and real estate combined), mainly serving as the core broad-based allocation;

• The remaining 30% introduces a dynamic adjustment mechanism, actively judging at the industry level to seek excess returns.

This means it is not a separate index outside the CSI 300 but a re-design of weight distribution and industry exposure within the CSI 300 framework.

The first feature of this mechanism is replacing the traditional market-cap emphasis with a more industry-balanced approach. The standard CSI 300 is essentially “market value determines weight,” leading to concentration in a few large-cap industries and leading stocks, which can cause the index to be heavily influenced by a few top sectors at certain times.

Anzhong Dynamic first reduces the dominance of single industries through more balanced industry allocation, preventing over-reliance on a few sectors. It retains the “core asset pool” attribute of the CSI 300 but changes how core assets are expressed.

The second, and perhaps most “magical,” aspect is embedding a dynamic industry rotation capability within the rule-based framework. Part of the index’s holdings are not static but adjusted based on judgments of industry prosperity, trends, and relative strength. In other words, the excess return of Anzhong Dynamic mainly comes from industry allocation rather than individual stock factor selection or extensive deviation by fund managers within the constituent stocks.

When market opportunities are more reflected in industry differentiation rather than a single industry “standing out” in the index, this mechanism can better realize its effects.

This explains why its return sources differ significantly from common CSI 300 index-enhanced products. Most quantitative enhancements aim for alpha through multi-factor models under industry-neutral or risk-constrained frameworks, focusing on stock-level factors like valuation, quality, momentum, etc. In contrast, Anzhong Dynamic starts from the index structure and seeks alpha through industry rotation. One is “bottom-up,” the other “top-down”; one profits mainly from stock selection, the other from industry allocation. Due to these different sources of excess return, they often show strong differentiation.

From 2019 to 2025, Anzhong Dynamic has demonstrated impressive excess returns, with years of significant outperformance and few underperforming years, usually only slightly.

Data source: Wind, 2019/1/1–2025/12/31. Past performance does not predict future results.

Anzhong Dynamic was jointly developed by European-based Anzhong Investment and Harvest Fund in 2013, launching its index fund at that time. To date, this remains the only index product based on this index.

Quantitative Index Enhancement: Seeking Excess Returns via Multi-Factor Stock Selection

If Anzhong Dynamic’s core is rewriting the CSI 300’s return structure through industry allocation, Harvest’s quantitative index enhancement system emphasizes continuously extracting excess returns from individual stocks within an index framework using more standardized, replicable methods.

Both product types pursue “excess,” but their alpha sources differ: the former emphasizes top-down industry judgment, while the latter relies more on bottom-up multi-factor stock selection and risk control.

Regarding team composition, Harvest’s quantitative team currently includes fund managers Wu Zhenxiang, Xu Yizun, and Wang Xingxing, along with two investment assistants and several researchers, with an average of 10 years of experience in quantitative investing.

Of course, for a quantitative team to generate sustained excess returns, the foundation is not just a few managers but a comprehensive quantitative research platform.

Currently, Harvest’s quantitative team, data science team, active equity research platform, and risk management system work in strong synergy, which is crucial in the current competitive landscape of index enhancement. Because index enhancement is not just “running models” but involves a full process from factor research, portfolio optimization, trade execution to post-trade attribution. Only when research, investment, risk control, and technology are integrated can excess returns be reliably translated into portfolio results.

Methodologically, Harvest’s quantitative index enhancement centers on multi-factor investing.

Multi-factor does not mean mechanically listing valuation, quality, growth, momentum, etc., but involves long-term research to identify variables that can explain future excess returns across different market environments, then dynamically combining these factors.

This approach is common among quantitative teams.

Harvest’s strength lies in emphasizing diversification of factor sources and balance at the portfolio level: considering both fundamental factors and market factors; focusing on medium- to long-term logic as well as medium- to high-frequency signals; utilizing traditional price-volume data and exploring new data processing methods. The goal is to avoid over-reliance on a single style or factor, making the sources of excess returns more dispersed—thus achieving more stable excess.

Because of this model, Harvest’s quantitative index enhancement product line is more suitable for normal A-share markets without dominant industry trends, complementing Anzhong Dynamic.

Currently, Harvest has two CSI 300 tracking quantitative index enhancement products:

• One established in November 2020, Harvest CSI 300 Index Enhancement (A-shares: 005530.OF, C-shares: 005530.OF, Y-shares: 022949.OF), managed by Xu Yizun. Xu is a seasoned manager pursuing a “conservative” style, avoiding industry or style deviations, mainly aiming to maximize alpha through meticulous execution.

Since inception, this product has outperformed the benchmark in most years, especially during 2021–2023, demonstrating strong downside protection and improving investor experience.

Data source: Fund periodic reports, Wind, 2021/1/1–2025/12/31. Past performance does not predict future results.

• In 2025, Harvest CSI 300 Quantitative Enhancement (A-shares: 025378.OF, C-shares: 025378.OF) was launched, managed by Wang Xingxing, aiming for more consistent and stable excess returns. Since inception, its performance has significantly surpassing the benchmark. Wang is a recent addition to Harvest’s quant team, previously a chief quantitative researcher at a securities firm, with deep research skills and unique insights into quant investing. His previous enhancement products delivered excellent excess returns. This product further applies his quant investment philosophy to the CSI 300, enriching Harvest’s CSI 300 index enhancement offerings.

Fundamental-Based Enhancement: The “Stock Picker” Approach

If Anzhong Dynamic represents industry allocation enhancement, and quantitative index enhancement emphasizes multi-factor stock selection, Harvest’s CSI 300 fundamental enhancement takes a third path: leveraging active research and active management to select stocks within a broad framework, transforming active stock-picking into index enhancement.

This approach is quite rare in the public mutual fund industry.

Harvest CSI 300 Fundamental Enhancement (A-shares: 010854.OF, C-shares: 010854.OF) is significant not just as “another CSI 300 enhancement” but as a different way of obtaining excess returns from fundamental research. Over recent years, mainstream CSI 300 index enhancement strategies have focused on quantitative multi-factor frameworks, using valuation, quality, growth, momentum signals to select and optimize portfolios. Fundamental enhancement emphasizes the judgment of analysts and fund managers on company quality, industry prosperity, competitive landscape, and profit trends, embedding these active management insights into the index enhancement constraints.

As a fund company with deep active management expertise, Harvest is known for being a “stock picker expert.”

How to translate industry research and stock selection advantages into index products?

Fundamental enhancement is precisely such an attempt: not entirely diverging from the benchmark, aiming for more transparent beta, while closely aligning with the risk-return profile of the CSI 300 and actively seeking alpha through research.

This idea is increasingly important for CSI 300 index enhancement products.

Quantitative excess in CSI 300 is difficult to achieve, a consensus in recent years’ public quant funds. Since the CSI 300 mainly covers large-cap, well-institutionalized, deeply researched companies, with high pricing efficiency, relying solely on standardized factors makes excess return more challenging.

Fundamental enhancement’s advantage lies in relying on analysts to understand company fundamentals, industry evolution, and market expectations versus actual operations. Sometimes, this judgment is more penetrating than purely statistical methods.

In 2025, stock-picking during a rising market again proved valuable, with active funds significantly outperforming the index. Harvest’s CSI 300 fundamental enhancement, empowered by active research, also showed notable excess returns compared to the benchmark.

Data source: Fund quarterly reports, as of 2025/12/31. Past performance does not predict future results.

If in the future, A-shares enter a structurally driven market with reduced Beta volatility and increased importance of Alpha, this fundamental-based approach may have broader prospects.

The smoke at the Strait of Hormuz continues, and the March haze in global financial markets may not have fully cleared. The pursuit of certainty persists.

For retail investors, what truly matters may not just be the broad market core of the CSI 300 but understanding where excess returns are coming from within the same broad framework.

Taking three CSI 300-related products from Harvest as examples: Anzhong Dynamic seeks structural opportunities through industry allocation; quantitative index enhancement exploits multi-factor models to find stock alpha; fundamental enhancement embeds active research to improve index performance.

All three paths address the same question: when “people outside the window are rushing, their eyes on the wet road,” who can better understand what they are truly seeking and how to find their own “fragrance”?

Risk Reminder: Funds are subject to risks; investments should be cautious. This material is for promotional purposes only and does not constitute any investment advice or promise. China’s fund industry is relatively young and cannot reflect all market phases. Past performance of funds does not guarantee future results, nor does the performance of other funds managed by the fund manager. Investors should carefully read the fund contract, prospectus, and product summary, fully understand the risk-return characteristics and features of the fund, and consider their own investment objectives, horizon, experience, and asset situation. Based on understanding of the product and sales suitability opinions, make rational and cautious decisions. All funds mentioned are high-risk products (R4), suitable for investors whose risk tolerance level is at least “Aggressive” (C4) after assessment. Fund managers Wu Zhenxiang, Xu Yizun, and Wang Xingxing manage similar products, with specific performance data available in official reports.