Using the index as a boat, carrying trust to go far, into the Bank of China Fund Quantitative Index Team

Ask AI: What market cycle opportunities are captured behind the launch of a free cash flow ETF?

How do you follow a path that belongs to you, guided by the investor-first philosophy, amid intense competition in the industry?

Website for Investing Time, Punctuation Finance Researcher: Zhang Jingyu

Today, index-based investing has already become an indispensable “infrastructure” in the field of asset allocation. With the number of domestic ETFs breaking through 1,400 and assets under management surpassing the 60 trillion yuan mark (data source: Wind), the industry is entering a brand-new stage of high-quality development. For fund managers, the key challenge is no longer simply stacking index-tracking tools, but truly understanding investors’ real needs, providing investors with long-term companionship and sufficient confidence through volatile markets.

With curiosity about these questions, we visited BOC Fund and held an in-depth conversation with the Quantitative Index Team to explore how this fund company, with years of index research and investment accumulation, can use the investor-first philosophy to carve out its own path amid fierce industry competition.

1. Finding the balance between passive investing and active investing

As China’s public fund industry moves toward high-quality development, China’s ETF market has experienced a leap from none to some, and from having ETFs to having better ETFs.

As one of the earlier fund companies to set up index-based investing in China, BOC Fund has been the first batch of managers of a number of ETFs across the whole market, including the SSE State-owned Enterprise ETF (SSE GuoQi ETF), the Shanghai Gold ETF, and the CSI Cash Flow ETF. Since its establishment, BOC Fund’s Quantitative Index Team has always remained true to its original intent of “putting investors first,” applying scientific investment and research logic to investment management and product planning, striving to create value for investors with professional strength.

In building its investment philosophy, the Quantitative Index Team has formed a clear and complementary core direction around two product tracks: passive indices and quantitative index enhancement (quant fund index increase).

Passive Index Investing: A Practitioner of the “Market Efficency Theory”

In one sentence, BOC Fund’s passive index investing philosophy can be summarized as: “Precise tracking, convenient allocation, and investment advisory empowerment.”

“Precise tracking” is the foundation of passive index investing. BOC Fund’s Quantitative Index Team uses refined management to strictly control tracking error, providing investors with pure index investment tools. Put simply, it is “what you see is what you get,” helping investors quickly capture investment opportunities, implement asset allocation conveniently, and effectively diversify investment risk.

But simply tracking accurately is not enough. The team also hopes to address investors’ allocation needs—“what to buy and when to buy.” To that end, the team delves deeply into index and strategy research and provides professional advisory-like guidance to upgrade a product’s “tool attributes” into “service attributes,” realizing true value-empowering investment advisory capabilities.

Quantitative Index Enhancement (Quant Fund Index Increase): An Executor of Improving Market Efficacy

Compared with passive indices, index enhancement follows “model-driven, disciplined execution.” Its goal is, while strictly controlling risk, to continuously create steady and tangible excess returns.

In terms of quantitative index enhancement, the team focuses on four core foundational areas: alpha models, risk models, portfolio optimization, and performance attribution. It also actively incorporates cutting-edge applications such as machine learning. On the basis of strictly controlling industry and style deviations and tracking error, it strives to maximize alpha, while controlling the drawdown risk of excess returns—seeking a balance between profitability and resilience—so that each increment of value for investors comes with greater confidence.

2. Build a “pyramid” talent pipeline and practice the core orientation of “long-term value”

Talent reserves are the carrier of vitality for the investment research (投研) system and the foundation for executing the investment philosophy; meanwhile, a mature and well-developed quantitative index investment research system provides a solid operating framework and efficient capability amplification for the talent pipeline.

From a higher perspective, talent reserves and the investment research system together form the core competitiveness of the business. For the team’s sustainable development, the team’s long-term stability can, in turn, continuously drive the high-quality development of investment research capabilities.

Talent pipeline building: Emphasize the team’s advantages in coordinated combat to build a “stable, professional, and diverse” team

It is understood that, through a talent development model led primarily by internal cultivation and supplemented by external recruitment, BOC Fund’s Quantitative Index Team has achieved stable overall operation of the team and continued development.

At present, BOC Fund’s Quantitative Index investment research team has more than 10 investment research personnel. Among them, there are 2 senior fund managers with over 10 years of investment management experience, 2 members of the mid-career generation with over 3 years of experience, and in recent years, 2 newly promoted fund managers from the junior/younger generation internally, forming a clear talent pipeline of “senior leaders guiding + mid-career backbone + junior/younger generation reserves.”

How can such a “specialized elite” team take on a rapidly developing business? BOC Fund has its own answer.

In terms of investment research capabilities, after more than ten years of accumulation, the team has independently completed the construction of everything from a database, a factor library, and an index analysis library to investment strategy models, and the models are also independently built and controllable.

In terms of talent selection, by improving training and mentorship mechanisms as well as strict eligibility and selection processes, the team has achieved professionalized, market-oriented capability.

In addition, the diverse composition of members’ backgrounds provides a good foundation for expanding the team’s business with multiple perspectives, multiple strategies, and multiple asset classes, and further improves its “coordinated combat” capability.

All members of the Quantitative Index Team have graduated from first-class universities at home and abroad. Among them, 2 hold doctoral degrees, and 3 have overseas study or work experience. Their professional backgrounds cover multiple fields such as finance, financial engineering, mathematics, and statistics, effectively helping the team form a composite knowledge structure. There are both “quantitative experts” who have delved deeply for many years, and “fundamental analysts” with rich accumulation. In addition, team members also have backgrounds in system operations, product development, and index research. With the deep integration of diverse backgrounds, the team has been promoted toward expansion across multiple perspectives, strategies, and asset classes, forming core capabilities such as multi-asset allocation, quantitative models, fundamental research, and index and product development, enabling precise support for the company’s overall index-based business strategic layout.

Team leader Mr. Feng Fuzi has nearly 20 years of experience in index-based business. He has participated in the formulation and design of multiple industry rules for index and ETF business, planned and developed multiple innovative product categories, and co-authored several professional books related to quantitative indices and ETFs. His unique insights into the industry also help the team better engage in the high-quality development of index-based investing.

Investment research system construction: Stick to the core orientation of “long-term value” and form a distinctive “investment research integration” closed loop

Upholding the core orientation of “long-term value” and enhancing investors’ sense of gain has become an important goal of the current public fund industry.

In building its product line, BOC Fund’s Quantitative Index Team strives to create its own distinctive features. It always focuses on high-quality tracks and effective factors with long-term growth logic. It hopes to form an index product line that enables investors to “hold it confidently, profit from it, and feel warmth.”

On this basis, leveraging the company’s investment research integration platform, as well as a large investment research system with shared central resources and cross-team coordinated linkage, the team continues to absorb and integrate research results across macro, strategy, and industry. Based on understanding macro policy trends and grasping industry trends, it extracts effective factors, builds quantitative models, and outputs index advisory-style services.

Index advisory exploration: Form a service system with distinctiveness and warmth

Given a market environment in which index products are becoming increasingly homogeneous, BOC Fund’s Quantitative Index Team emphasizes—building a full-chain “advisory-style” service system, shifting from “providing index tools” to “teaching investors how to use the tools well.”

Previously, the team spent more than a year repeatedly refining and building a closed-loop investment advisory service output covering “index research,” “asset allocation,” and “strategy portfolios.” It transforms professional research into investment plans that investors can understand, use, and trust—so that index tools truly become a companion for investors to move forward long term.

3. BOC Fund’s path in index-based investing: Use research to drive products, use products to capture value, use advisory to convey value, and use value to accompany customers

Looking back on the product development journey of index products, BOC Fund has always adhered to the philosophy of “using research to drive products, using products to capture value, using advisory to convey value, and using value to accompany customers.” Based on index analysis models, macro policy, and industry trend research, it continuously improves the layout of index products.

At present, the company’s index and index enhancement products cover broad-based indices (such as STAR Market 50 and ChiNext 50), thematic indices (such as HK stock connect internet and robotics), strategy indices (such as cash flow and dividend/bonus), commodities (Shanghai gold), and other sub-categories; it also has allocations across major asset classes including equities, commodities, and bonds.

Among them, the BOC CSI All-Share Free Cash Flow ETF launched in 2025 is the first batch of CSI All-Share Free Cash Flow ETFs—an vivid example of BOC Fund’s commitment to putting investors first and deeply developing high-quality index product offerings.

Behind the creation of this product are the company’s keen insights into the intersection of three “cycles.”

First is the macroeconomic cycle. From late 2024 to early 2025, the investment research team observed that the macro economy is shifting from “pursuing growth speed” to “emphasizing quality,” with the transition of new and old drivers of growth underway and industries finding new paths for transformation and development. In this trend, the investment value of targets that can steadily generate free cash flow and also have anti-cycle capability, sustainable development capability, and dividend potential has been rising day by day.

Second is the industry and policy cycle. At that time, “cash cow” type assets were entering a phase of value re-assessment. This not only reflects the stability of competitive industry patterns, but also aligns with policy directions that encourage dividends and return value to investors.

Third is the investor demand cycle. Through ongoing companion-like interactions and education with investors, the company deeply felt that after experiencing market volatility, investors’ demand for “steady value appreciation” became unprecedentedly strong. They want to find allocation-oriented products that can go through cycles and hold steadily over the long term.

When these three cycles converge at a single point, the window period for the “free cash flow” strategy arrives. The company developed the product immediately, and it became the first batch of managers of this index product across the entire market.

The launch of the product is by no means accidental. It comes from continuous research accumulation, including the database and strategy models independently built by the team, as well as the team’s keen capture of factor effectiveness.

At the same time, this product is also a representative example of publicizing the advisory-style service philosophy. After the product’s issuance, in terms of investor education, the company and the team continue to introduce, through multiple channels, the meaning of free cash flow, and explain how it differs from traditional dividend/bonus strategies—helping investors better understand this “new tool.”

The team has always believed that if product layout is the lower bound of the business, then index advisory services in the future will determine the upper bound.

4. Proactive layout of the “15th Five-Year Plan (FYP)” for 2026–2030 and building a new ecosystem for index-based wealth management

At the start of 2026—the opening year of the “15th Five-Year Plan (FYP)”—BOC Fund’s Quantitative Index Team believes that the A-share market is likely to show a slow bull market characterized by upward oscillation and structural differentiation.

From the perspective of asset allocation, facing uncertainty outside the market, investors may consider abandoning the approach of betting on a single track, and instead allocate from a multi-asset, multi-strategy, and long-term perspective. Follow four key principles: diversify across multiple assets, combine multiple indices, enhance with multiple strategies, and hold for the long term.

As a witness to and deep participant in China’s public funds, BOC Fund has always upheld a customer-centered approach and promoted the wealth management transformation of the broader asset management industry.

BOC Fund’s Quantitative Index Team will also provide index-based allocation services tailored to different investors based on their different risk preferences, investment time horizons, and wealth goals—helping clients achieve a reasonable balance between risk diversification and return. It builds a virtuous cycle of “product layout—experience optimization—cognition enhancement,” making it a trustworthy index companion for investors.

Risk warning: Funds involve risks; investing requires caution.