Active products dominated the value style in the past, and the index lacked flagship products. On the one hand, value active equity products can obtain higher returns in a bull market environment — this helps increase product popularity and form a long-term stable customer base. On the other hand, even if the average performance is poor in a bear market environment, some bright products can attract investors' attention. In contrast, value index products are unable to gain rapid attention through high-yield performance in a bullish market environment, and they also lack direct appeal in a bear market environment, so they have failed to successfully create value index flagship products in the past few years.

The China Securities Guoxin Value Index, which is integrated into the PB-ROE framework, brings higher returns. Among the value index funds currently issued on the market, the largest number and scale are tracking the Shanghai and Shenzhen 300 Value Index. In addition, there are also index funds that track the Shanghai Securities 180 Value Index and the China Securities 800 Value Index. In terms of compilation methods, there are two major differences between the CSIC Guoxin Value Index and other value indices: 1) the CSIC Guoxin Value Index introduces ROE screening conditions to form a similar PB-ROE stock selection framework; 2) the CSIC Guoxin Value Index uses an equal weighting method, while other value indices use market value weighting.

In the 2015/1/1 to 2024/5/31 statistical period, the annualized return of Guoxin Value's full return was 9.07%, and the annualized return of 180 value, 300 value, and 800 value full return was 4.34%, 5.38%, and 5.49%, respectively. In terms of annualized volatility, there was not much difference between the four value indices, so Guoxin's full value return ratio was also higher. On a yearly basis, in the market where the market grew from 2019 to 2023 and switched to small-cap value, Guoxin Value's full earnings significantly outperformed other value indices in 2020, 2021, and 2023, while the yield in 2019 and 2022 equalled with other value indices.

We have counted the chronological overexposure of Guoxin Value compared to the 300 Value Index on the three factors of valuation, profit, and market value since 2019. As can be seen, Guoxin value continues to be overallocated in terms of profit factors; furthermore, in terms of valuation factors, Guoxin Value does not pursue absolute undervaluation values like the 300 Value Index, and this will avoid falling into the undervaluation trap to a certain extent; furthermore, index constituents use an equal weight method, so that Guoxin Value is more moderate in terms of market value compared to the 300 Value Index, and is not too concentrated on large market capitalization stocks. In terms of industry allocation, compared to the 300 Value Index, Guoxin Value is greatly under-allocated to the financial sector, while in other industries which are more fragmented, the weight distribution of the industry is relatively scattered.

The Wells Fargo Value 100 ETF was established on November 7, 2018. The fund code is 512040.OF. It was listed and traded on the market on November 29, 2018. Until the fourth quarter of 2023, the fund share of the Wells Fargo Value 100 ETF remained at a low level, but as the Guoxin Value Full Income Index achieved positive returns since 2023 and continued to outperform excess returns compared to the Shanghai and Shenzhen 300 full earnings, the fund share also rose rapidly. As of 2024/6/6, the fund share of Wells Fargo Value 100 ETF reached 2.104 billion shares, ranking among the top fund shares among value ETFs; at the same time, the activity of 100 ETFs in the market also increased significantly. On 2024/6/6, the average daily turnover since this year was 0.05 billion yuan.

Fund Manager Profile: Ms. Cao Ludi, joined Wells Fargo Fund Management Co., Ltd. in July 2016. She has served as an assistant quantitative researcher, quantitative researcher, and is currently the quantitative fund manager of the quantitative investment department of Wells Fargo Fund. As of 2024/6/6, there are 9 ETF funds under management, and the total net asset value of the funds is 10.093 billion yuan.

Risk warning: The research and analysis of fund products and indices in this report is based on historical public information, which may cause certain analytical deviations due to changes in index sample stocks; in addition, the historical performance and performance of fund managers does not represent the future; future performance of the index is affected by multiple factors such as the macro environment, market fluctuations, and style changes, and there is a certain risk of fluctuation; this report does not cover securities investment fund evaluation business, recommendation of fund products, or recommendation of any index sample stocks.