Summary of Key Points
This article reveals the underlying reasons for fund clustering by comparing the differences between consumer-related clustering in 2021 and technology-related clustering in 2026: it is not a result of individual基金经理 choices, but rather a forced outcome of industry circumstances and mechanisms. The article points out that the current revenue model of public funds, which prioritizes scale, the short-term performance orientation of sales platforms, and the investors' desire for quick returns are all contributing to this phenomenon. By examining the American 401(k) plan, the author proposes a solution: to change the nature of the capital flow at the source by establishing long-term, default investment accounts that automatically direct funds towards long-term products, rather than trying to adjust fees or salaries at the later stages.
Detailed Analysis
1. Two Types of Clustering: One Happens When Money Flows In, the Other When Money Leaves
The two instances of clustering in 2021 and 2026 may seem similar, but they are fundamentally different:
- Consumer-related Clustering in 2021: A large amount of new capital flowed into the fund industry (2.3 trillion yuan raised by equity funds between 2020 and 2021), leading investors to buy consumer stocks, which accounted for 18.5% of their portfolios. However, the consumer sector later plummeted, and those who invested in funds at the beginning of 2021 have not yet recouped their losses.
- Technology-related Clustering in 2026: Conversely, there has been a continuous 14-quarter net outflow of funds (three-quarters of the funds lost capital), with only the top-performing technology funds attracting new investments (the top 100 funds received 65% of all new investments). Fund managers were forced to focus on technology stocks, which accounted for 60% of their portfolios; otherwise, they would face declining net asset values, losing shares, and being pressured by their companies.
Common Outcome: Investors suffer in both cases—those who bought into consumer stocks at high prices in 2021 lost money, and those who invested in technology stocks in 2026 are either stuck in outdated sectors or chasing unprofitable investments.
2. Why Do Fund Managers Have to Cluster?
The choice of fund managers is not based on their willingness but on external pressures:
- Revenue Structure: Fund companies' revenue comes from management fees based on the size of their portfolios; larger portfolios generate more income. Sales platforms (such as apps) only promote funds that perform well in the short term, and if managers do not focus on popular investments, they lose scale and revenue, which could lead to their removal.
- Penalty Mechanisms: In 2026, managers who did not invest in technology stocks faced a triple setback: declining net asset values, losing shares, and being forced to sell their existing holdings. Companies also often hire additional managers (under the guise of teamwork) to increase pressure on these managers.
Conclusion: The system rewards those who cluster their investments and punishes those who do not, making it inevitable for managers to follow the trend.
3. Concentration in the US Stock Market, but Why Don’t Active Funds Follow?
Although the top seven companies in the US stock market account for 30% of the S&P 500’s market value, active funds underweight these stocks by an average of 7 percentage points. The reason lies in the nature of the capital:
- US Capital is Long-Term by Default: 401(k) retirement accounts automatically deduct contributions from employees’ wages, with companies contributing additional funds, and withdrawals are only possible upon retirement. Investors are typically allocated to diversified products (such as target-date funds), with 97% holding equity assets, but only 5% making active adjustments to their portfolios.
- Chinese Capital is Short-Term Oriented: Chinese investors hold funds for an average of less than three months and withdraw as soon as they make a 10% profit. This short-term mindset forces managers to focus on popular investments.
Key Difference: The concentration in the US stock market is driven by profit (high profitability of top companies), while clustering in China is driven by capital flowing towards short-term winners.
4. The Solution: Making Capital Automatically Long-Term
The success of the American 401(k) plan lies in its default mechanisms:
- Automatic Participation: Companies have changed from voluntary participation to mandatory enrollment, increasing new employee participation rates from 37% to 86%.
- Automatic Contributions: Monthly deductions from wages, with companies contributing additional funds, creating a sense of urgency (as not contributing results in losses).
- Default Allocation to Long-Term Products: Investors are automatically allocated to long-term products, such as target-date funds, without the need for active selection.
In China, personal pension accounts are too small (only 0.04% of public fund assets) and require active management, making similar default mechanisms ineffective.
5. Why Aren’t Fund Advisors More Popular?
Fund advisors, who offer diversified and long-term investment strategies, should improve investor experiences, but they account for only 0.5% of the public fund market. The reason is that industry rules reward those who cater to short-term desires:
- Sales Platforms Promote Short-Term High-Yield Funds: These funds generate high conversions (e.g., returns of 160% in the past year), making them more attractive to investors.
- Scale-Oriented Revenue Models: Advisor institutions still rely on scale for revenue, so they must focus on short-term demands, leading to a return to clustering.
Conclusion: To promote the growth of fund advisors, sales rules need to change to make advisors the default option, rather than relying on short-term performance.
Final Thoughts
The core message of the article is that the key to changing market behavior lies not in fund managers but in the nature of the capital. By establishing long-term default investment accounts similar to the 401(k) plan, funds will naturally flow towards long-term products, reducing clustering and volatility. This does not require “educating” investors but rather leveraging human tendencies to make better financial decisions—just as American children naturally understand that stocks represent companies and that money grows over time. In the future, Chinese investors can also develop similar understanding.