The precious metal market has recently experienced a notable surge, particularly on February 8th, when COMEX gold futures reached a staggering high of $2,886.80 per ounceThis dramatic rise has prompted several Fund of Funds (FOF) managers to strategically allocate assets into gold prior to this uptickCompounding the situation, data from the end of the fourth quarter last year reveals that two FOF products from companies such as Xingsheng Global and Jiaoyin Anxiang have collectively held over 20 million shares in gold ETFs.

Industry insiders suggest that investing in gold through FOF products presents multiple advantagesFirstly, during an upward trend in gold prices, it could significantly enhance the product's returnsSecondly, incorporating gold into asset allocation strengthens the product’s broader asset strategy and increases portfolio diversificationThis strategy aims to render investment portfolios more robust and to enhance the experience of investors holding these diversified assets.

Looking ahead, numerous fund managers assert that opportunities in the gold market remain promising even as they urge investors to stay vigilant regarding potential trading risks

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Some suggest waiting for a market correction before entering the gold market to capitalize on more favorable prices.

As of the conclusion of the fourth quarter of 2024, Huabao Gold ETF has emerged as the most held fund among FOF productsA staggering total of 56 different FOFs have invested in the fund, leading to an overarching holding of 122 million units, valued at approximately 13.058 billion yuanBreaking down these figures further, Xingsheng Global possesses 22.788 million units of the Huabao Gold ETF alone, with a documented holding worth 135 million yuan.

In terms of operational strategies concerning gold allocation, Fund Manager Ling Guohua commented in Xingsheng Global’s 2024 Q4 report, “After the closed period of Q4 has lapsed, our fund transitioned into an open-ended structure while concurrently updating our performance benchmarksThis transition positions the fund as a diversified FOF product with a high equity allocation, introducing offshore equity assets, gold, and other asset types into our strategic asset allocation.”

Furthermore, Jiaoyin Anxiang’s one-year stability retirement plan also reported substantial holdings in the Huabao Gold ETF, accounting for 20 million units valued at 11.8 million yuan

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Meanwhile, Huabao Yingrui’s six-month stable selection fund holds 13.5 million units of the same ETF, with an investment worth around 8.007 million yuan.

With the ongoing uptick in gold prices, this week has witnessed Huabao Gold ETF rising by 3.51%. As of February 7th, the year-to-date increase stands at 8.3%. This rally in gold ETFs has positively impacted FOFs that rely on such assetsFor instance, the Jiaoyin Anxiang one-year stability fund recorded a nearly one-month yield of 0.68% and a six-month yield of 4.45%, both placing it in the top half among its peers.

The growing trend in the allocation of assets into gold highlights a strategic emphasis on broader asset diversification within various FOF productsFund managers increasingly prioritize the importance of diversifying asset classes, suggesting that including gold can significantly enhance a portfolio's resilience.

Manager Liu Bing of Jiaoyin Anxiang commented in the fund’s 2024 Q4 report about the move to incrementally increase gold holdings as a means to broaden the portfolio’s diversity

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He noted, “We will continue monitoring various asset classes to optimize multi-asset strategies, aiming to achieve relatively stable long-term returns and enhance our investors’ experiences.”

Other fund managers have echoed similar sentiments, suggesting the advantage of introducing various asset classes, such as gold and American equities, to harness their low correlation, thereby improving the overall experience for clients holding diversified portfolios.

Yang Zhiyuan and Lu Jingchang, managers of Huabao Yingrui’s six-month fund, indicated in their 2024 Q4 report that they actively refined their asset allocation structureThey employed a diversified multi-asset management strategy that included investments in U.Sstocks and gold commodities, while also increasing exposure to foreign U.Sdollar-denominated bondsBy leveraging the low correlation among diverse asset classes, they effectively enhanced both the Sharpe ratio of the portfolio and the holder experiences.

A mid-sized public fund researcher commented on the importance of risk management for FOF products, stating, “When FOFs are limited to traditional equities and bonds, net value fluctuations are likely to be influenced heavily by market beta

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Introducing assets like gold and dollar bonds allows for a diverse allocation and balanced risk management, thereby boosting the portfolio's resilience against market fluctuations and stabilization of returnsThis enhances the competitiveness and attraction of FOF products while benefiting investor experiences.”

This perspective underscores the growing recognition among fund managers of the necessity for diversified allocations beyond mere equities and bondsAs stated by the researcher, “Over the past few years, experience has shown that a focus solely on equity and bond allocations, regardless of the selection of fund managers, leads to significant exposure to market beta driving fluctuations in net worthAs a result, managers are increasingly prioritizing diversified strategies for major asset classes.”

In terms of future possibilities, several fund managers maintain that there remains substantial investment potential in gold assets

Wang Ligang of Yinhua Fund indicated that significant variables, including the new administration's policy directions post-inauguration, are pivotal drivers requiring attentionHe noted that while China is ramping up its policies to stabilize the economy and capital markets, it will take time for these to take effectIn such an environment, gold continues to be a primary focal point of investment strategy.

Additionally, Liu Tingyu, manager of the Yongying Gold Stock ETF Link Fund, stated that both gold and gold equities possess considerable room for appreciationInsights from the recent Fed meeting highlighted an excessively pessimistic market stance concerning anticipated interest rate cutsLiu anticipates that a stabling U.Seconomy may not unfold smoothly, leading to potential overestimations of rate reductions going forward.

Liu went on to note that the global trend of central banks increasing gold purchases is expected to provide long-term support for gold prices

Notably, the People's Bank of China restarted its gold purchases after a six-month hiatus, showcasing broader trends of emerging market countries intensifying their gold accumulation, which collectively establishes a pivotal support level for gold pricingWith ongoing global monetary easing coupled with geopolitical uncertainties, the projected space for gold prices in the year ahead remains significant.

However, the recent rapid rise in gold prices has prompted some analysts to caution against market risksWang Xiang, manager of Boshi Gold ETF, emphasized the potential risk in the current landscape, noting, “While the supportive reasoning for gold assets this year is robust, after three years of sustained growth, it is probable that we will see lower overall returns compared to last yearThus, waiting for a market correction before re-entering could be a more prudent approach.”