In the wake of increasing volatility in global financial markets, a novel trend is emerging within the realm of public funds, particularly through Fund of Funds (FOF) productsThese offerings are beginning to embrace a multi-asset allocation strategy that seeks to enhance diversification and potentially mitigate risk through various investment channels.

Notably, foreign public fund companies are initiating a foray into the Chinese market with these diverse strategiesIn mid-January, Fidelity Investments made headlines by launching its first multi-asset strategic FOF product in ChinaThe "Fidelity Ren Yuan Steady Three-Month Holding Hybrid FOF" successfully raised 867 million yuanThis product is particularly significant as it represents the inaugural global multi-asset allocation strategy FOF product introduced by a newly established foreign public fund in the country, marking Fidelity as a trailblazer among its peers.

The fund debuted sales on January 6, 2025, and impressively concluded its fundraising phase just a week later, securing regulatory approval by January 15. Interestingly, the scale and speed of fundraising positioned this fund among the top three in size among newly launched FOF products in the past yearSuch a milestone not only reflects foreign investors' keen interest in China's financial landscape but also highlights the growing allure of diversified asset allocation strategies within the current complex market environment.

Chinese asset management firms are also zealously integrating multi-asset principles into their FOF offeringsFor instance, in November 2024, the "Xing Zheng Global Active Allocation Three-Year Closed Hybrid FOF" transitioned to an open-end structure and was renamed "Xing Zheng Global Active Allocation (FOF)." This fund marked a significant innovation by incorporating both the MSCI World Index returns and the closing prices of the Shanghai Gold Exchange's Au99.99 spot contract into its performance benchmark, a first for such products in the Chinese market

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Apart from domestic assets, the Xing Zheng Global FOF has started including overseas equities and gold, thereby enhancing its risk dispersion and capitalizing on global market opportunities, setting a precedent for FOF diversification in China.

When diving into specific categories of multi-asset allocation, gold and Real Estate Investment Trusts (REITs) have emerged as favored targets among public FOF productsRecent quarterly reports from 2024 indicated that several public FOFs demonstrated either their maiden investments in or substantial increases in holdings of gold Exchange-Traded Funds (ETFs) in the fourth quarterFor example, "Xing Zheng Global Active Allocation A" raised its stake in Huazhong Gold ETF by as much as 22.79 million shares, reaching a market value of approximately 135 million yuan, while "Huazhong Yingrui Stable Preferred 6-Month Holding A" increased its holdings by around 13.17 million shares, valued at 80.08 million yuan.

The growing appreciation for gold as an investment asset is underscored by the analysis from Huazhong Fund, which highlights four pivotal reasons for gold's significance as an asset class in 2025. First, expectations for a return to traditional pricing dynamics concerning real interest rates may arise as the global economy slows and the U.S. grapples with persistent long-term re-inflation challengesSecondly, amid increasing concerns of de-globalization, central banks are likely to maintain their gold purchasing rhythmsFurthermore, the low correlation of gold with other major asset classes, coupled with the current interest rate reduction environment, accentuates its strategic value for investorsLastly, gold’s intrinsic monetary properties—serving as a hedge against the credit risk associated with the U.S. dollar—become even more relevant given the escalating debt pressures and high-interest rates in the U.S. economy.

In a longer-term lens, investment demand for gold, driven by fears of de-globalization and concerns over the U.S. dollar's reliability, alongside net purchases by central banks and technological demands, seems poised to remain robust even as supply stabilizes

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