The end of 2024 marks a significant shift in the performance landscape of investment funds, particularly for those impacted by fluctuations in capital markets. After a challenging start to the year, characterized by considerable volatility, actively managed equity funds have shown robust recovery, achieving impressive results. Among them, the Morgan Stanley Digital Economy A share fund stood out with an impressive yield approaching 70%. Meanwhile, the average return for all actively managed equity funds reached 3.71%. Bond funds maintained a solid performance as well, with an average yield of 4.45% and the highest achieving a return of 20.24%. Notably, Qualified Domestic Institutional Investor (QDII) funds emerged as the leaders, with an average return of 12.52%, and some individual funds yielding as high as 51.22% for the year.

The prominence of digital economy-themed funds has become particularly evident amid the larger cohort of actively managed equity funds. Many of these funds brought back stellar returns, with numerous achieving yearly gains exceeding 20%. In contrast, some small-cap focused funds face significant hurdles, continuing to struggle from the severe downturn at the start of the year. This divergence in performance illustrates the necessity of strategic fund management reliant on emerging market trends and risk assessment.

In interviews with fund managers, it was emphasized that themes such as dividend sectors and artificial intelligence (AI) have increasingly captured market interest. Lei Zhiyong, the manager of the Morgan Stanley Digital Economy fund, highlighted that the definitive nature of both AI and dividend assets appeals directly to investor confidence. His philosophy revolves around leveraging clear performance indicators and the overarching growth trajectory of China’s tech sector. This strategic focus enables the fund to capitalize on the burgeoning opportunities in the domestic digital market, directing investments toward sectors poised for growth.

The robust performance of digital economy funds can be attributed significantly to the economic stimulus following the “9·24” policy initiatives. According to Wind data, the entire market comprised 8,760 actively managed equity funds, achieving an average annual return of 3.71%. The champions of this competitive field, the Morgan Stanley Digital Economy A and C shares, delivered remarkable returns of 69.23% and 68.25%, respectively. Other strong performers include the Haitong Prosperity Selection funds, which posted returns of 51.85% and 50.67%.

The numbers tell an encouraging story: of the actively managed equity funds, six surpassed a 50% return, while an impressive 40 funds yielded over 40%. Notably, 6,006 funds ended the year with positive returns, marking a notable 68.56% success rate among actively managed equity funds. A closer look at the top twenty performing funds reveals a compelling trend: nearly all featured substantial investments in technology sectors, propelling their success.

For digital economy-themed investments, the year saw an average return of 17.62% across the 50 funds dedicated to this area, with only four reporting negative growth. Over half, or 62%, of these funds achieved returns exceeding 10%, showcasing the vitality and investor interest in digital solutions and infrastructure in the broader economy.

Achieving high performance in the competitive arena of active equity funds requires a well-rounded approach to investment. Lei Zhiyong’s methodology encompasses a comprehensive interpretation of industry trends and a nuanced analysis of specific stock behaviors, ultimately solidifying a robust investment framework. His focus on critical strategic decisions regarding sector weights and poised entry or exit points reveals the meticulous legwork underlying strong financial outcomes.

Jin Zicai, manager of the second-leading fund—Haitong Prosperity Selection—echoed similar sentiments regarding investment strategies. Recognizing the significance of artificial intelligence in driving market opportunities, he discussed the need for investors to seek companies with expansive growth prospects. Jin outlined that firms positioned in industries with low current penetration and potential for rapid market adoption are particularly attractive. This emphasis on identifying the future ‘unicorns’ speaks to a broader trend of companies innovating their business models to capture changing consumer behaviors.

As 2024 progressed, many small-cap theme funds experienced substantial declines influenced by significant market fluctuations earlier in the year. The poor performance of micro-cap stocks, exemplified by a staggering decline of 46.65% between January 5 and February 7, caused a seismic shift in optimism amongst investors as liquidity issues surfaced. The drastic reduction in this sector swiftly realigned market perceptions and forced numerous funds to re-evaluate their strategies. Unfortunately, those heavily invested in these small-cap stocks suffered the brunt of this downturn, leading to notable losses in fund value.

Compounding the difficulty, funds that experienced substantial downturns in early 2024, particularly those heavily weighted in small-caps, faced considerable challenges in reclaiming their positions. For instance, the poor-performing Jinyuan Shun'an High-Quality Selection Fund A and C shares recorded staggering declines of 99% amid the struggles of micro-cap stocks. Within the bottom rankings, nearly all funds suffered due to this downturn—only one fund managed to escape unscathed. The repercussions of this downturn continue to dictate fund performance metrics, emphasizing the precarious nature of market investments.

However, despite these challenges, the outlook for 2025 suggests a continued interest in the AI sector. Wang Xiaochuan, manager of the Yinhua Digital Economy Fund, remains optimistic about the A-share market, predicting stability given the historical valuation levels and robust liquidity conditions. The anticipated policy interventions promoting economic recovery further bolster this positive sentiment.

Moreover, as markets evolve, the ability of companies within the AI ecosystem to deliver measurable returns is paramount. According to analysts, the burgeoning field of artificial intelligence and its derivatives are expected to drive a wave of new investment opportunities, transforming industries in the coming years. As seen from previous cycles, each wave of technological advancement generates a new class of market leaders, igniting investor enthusiasm and generating financial growth.

This encouraging forward-looking perspective highlights the evolution of the market landscape, particularly as traditional industries adapt to revolutionary technologies. With the outlook suggesting a gradual bullish trend, the focus on investment strategy—balancing diversification with emerging trends—will remain critical. As 2025 approaches, the investment community will keenly watch for signs of sustained growth driven by innovations in digital technology and broad-based economic recovery.