The recent fluctuations in the A-share market have drawn considerable attention, particularly amidst the rise of specific sectors that have shown resilience despite the overall downturnNotably, sectors such as non-ferrous metals, power generation, and petroleum chemicals have emerged as strong performers, driving a substantial divergence in the performance of various fund productsAs of April 19, a remarkable 88 mutual funds reached new historical highs in their net asset values (NAVs), signaling a robust recovery in these traditionally cyclical sectors.

Analyzing the attributes of these successful funds reveals that many of them have strategically concentrated on trending stocks within these robust sectorsMoreover, several funds were established during market lows, thereby avoiding the pitfalls associated with deep declines in value

Fund managers' consistent strategy of "realizing gains" has also contributed significantly to their NAV accumulation.

Indeed, the performance of various funds that recently hit historical highs has been noteworthy.

Since the beginning of the year, the overall trajectory of the A-shares has exhibited a pattern of initial repression followed by a rebound, albeit with only slight declines in indicesHowever, the sector rotation has been extreme, leading to significant variations in the performance of individual stocksFor instance, while the excitement surrounding artificial intelligence (AI) stocks has cooled after an initial surge, sectors like renewable energy have struggled after hitting bottomIn contrast, commodities such as non-ferrous metals and crude oil continue to experience sustained upward momentum

Additionally, as we entered April, the banking sector – which had previously seen substantial reductions from public mutual funds – has drawn renewed interest.

Statistical analysis reveals that on April 19, a total of 88 mutual fund products achieved record-high NAVsLeading the pack was the Changsheng Growth Value fund, with a calculated NAV of 14.26 RMBThis fund, which launched in 2002, has shown impressive growth, increasing more than thirteenfold over its two decades of existenceOther notable funds that reached new heights include the Runtong Domestic Demand Driven fund, established before 2010, which boasts an NAV of 3.21 RMB and a return of 220% since inception, and the Invesco Great Wall Energy Infrastructure fund, now at 4.62 RMB and up 362% since its launch.

Furthermore, a plethora of other funds, including Tianhong Value Select, ICBC Selected Return, and Huabao New Value, are on the brink of achieving their historical NAV highs.

In the short term, it is apparent that these top-performing products have largely invested in cyclic sectors, with specific allocation in non-ferrous metals and resource stocks

For example, the Wanjia Cycle Driven fund has reported a remarkable 25% rise this yearAs of the latest data at the end of the first quarter, its top holdings include Zijin Mining, COSCO Shipping Energy, and Shandong Gold, among othersOther funds like the China Europe Value Return and Huabao Dividend Select have also surpassed 16% gains this year.

Moreover, a recurring trend among the funds yielding the highest returns this year is the prevalence of terms like "dividend" and "cycle" in their namesWhen examining long-term performance, many funds close to or at historical highs are characterized by substantial allocations in high-dividend, low-price-to-earnings ratio stocksRather than shifting allocations to volatile, trendy short-term stocks like AI, these funds concentrate on goldmine opportunities in consistently high-performing stocks.

What patterns can we discern among these record-breaking funds?

So, what additional characteristics do the funds achieving new NAV highs possess?

Firstly, a considerable number of these products are relatively "young." Among the 88 funds that achieved record highs, 24 were newly established last year

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These funds have not inherited significant historical baggage or value holes that they need to "fill," positioning them advantageously from their inceptionFor instance, the China Europe State-Owned Enterprise Dividend fund was launched in September of last year, and the Guangfa Ruijie Selected fund debuted in November, both heavily invested in popular sectors immediately after their establishment.

Additionally, while funds from various launch years feature in the performance of record highs, notably absent is any fund founded in 2021. This absence is attributed to the collapse of the "core assets" bubble during that time, which left many funds burdened with exposure to prominent stocks at inflated valuationsAs a result, these funds have faced significant challenges in reaching new highs during the subsequent years

Conversely, funds launched around the bullish market period of 2015 have generally not exceeded an NAV of 2 RMB and often consist of mixed-asset funds focused on bonds, underscoring the difficulties in achieving record highs following the end of a bull market.

Secondly, the role of fund managers is pivotal in the long-term success of these productsTaking the Changsheng Growth Value fund as an exemplar, its recovery through various market cycles has been significantly influenced by the managerial strategy of "realizing gains."

Current fund manager Wang Ning initiated management when the A-share market was still riding high in August 2021. The fund's previous heavy allocation included prominent assets like Aimei Ke, Sunshine Power, and Kweichow Moutai, leading to a NAV decline of more than 17% amid market shifts

However, within a month of taking over, Wang successfully altered six of the top ten holdings, pivoting towards green energy and subsequently revitalizing the fund's NAV.

In subsequent trading days, Wang has maintained a practice of slightly adjusting holdings each quarter, frequently replacing five to six stocks from the top ten, while ensuring a diversified portfolio—keeping total asset concentration below 30% for the top ten holdings, with recent figures even hovering around 20%.

Reflecting on his strategies during the last year, Wang noted in the annual report: the first half saw active engagement in AI and valuation opportunities, with an emphasis on profit realizationThe second half of the year then shifted to a more defensive composition, resulting in positive overall returns and outperforming the benchmark.

In the recently disclosed first-quarter report, Wang indicated a cautious participation in emerging growth investments while adhering to a strategy focused on absolute returns, stating the extent of involvement would be kept less than levels observed during last spring and gradually recognizing profits to enhance portfolio resilience.

The Runtong Domestic Demand Driven AB fund follows a similar "take profit" approach