The third quarter reports for publicly offered Fund of Funds (FOFs) have been progressively released. By October 25th, the most recent data on major fund holdings clearly shows that index-based allocation within FOFs is gaining significant momentum. For some individual FOFs, among their top ten major fund holdings, as many as nine are Exchange Traded Funds (ETFs), with active funds making only rare appearances. The ETFs that are heavily held span a diverse array of categories, encompassing broad-based, bond, thematic, and commodity ETFs.

In response to this robust demand, fund products have “ridden the wave” (shùn shì in Chinese, which aptly translates to “taking advantage of the prevailing trend”) by introducing innovative varieties. These include diversified allocation FOFs and ETF-FOFs. While the incorporation of index funds does indeed provide FOFs with a broader range of allocation options, it simultaneously places higher demands on the allocation skills and expertise of fund managers.