High-Flyer Quant Drops Over 20% in July Alone; Institutions Say AI Theme Is Not Over
0xBroomberg
All nine of High Flyer Quant's showcase products fell more than 20% in July alone, as top Chinese quant funds suffered a system-wide drawdown; yet mainstream institutions including Danshui Spring and Industrial Securities argue AI is entering a "second-half correction," not a trend reversal — insurers are already buying the dip.
How bad was High Flyer's July?
All 9 of High Flyer Quant's (幻方量化) showcase products lost more than 20% in July. The worst hit — High Flyer CSI 500 Quant Aggressive No. 1 — dropped 22.15% in a single month.
As of July 31, 8 of the 9 products have turned negative for the year. The deepest year-to-date loss stands at 3.84%.
This means → one month of drawdown wiped out nearly all of the first half's gains — and then some.
Did other top quant funds hold up?
Minghui Capital (明汯投资): 9 of 14 products are negative for the year. The worst, Minghui Select CTA, lost 10.78% through July.
Nine Kunpeng (九坤投资): 14 of 15 products are still positive year-to-date, but Nine Kunpeng CSI A500 Index Enhanced No. 1 fell over 11% in July alone, eating deep into earlier gains.
Yanfu Investment (衍复投资) fared best — only 1 of 14 products is negative for the year.
In plain terms = every top quant fund took damage, but the severity varied enormously — High Flyer was a critical wound; Yanfu was a scratch.
What caused the collective drawdown?
Multiple quant fund managers pointed to a triple resonance: extreme style convergence + crowded trades + synchronized domestic and foreign sentiment deterioration.
One manager said: "The volatility of the momentum factor — a gauge of how aggressively 'chase winners, dump losers' strategies are running — multiplied several times over in July. That was the real risk amplifier."
This means → the problem was not simply too much tech exposure. Funds were all betting the same direction and got harvested in reverse — a strategy stampede.
What do institutions think — is the AI trade over?
An Industrial Securities (兴证) strategy survey shows the 3,700-point level on the Shanghai Composite is seen as the consensus floor. Insurance capital — "absolute-return money" that prioritizes steady gains — has been buying into the dip.
The mainstream view attributes this correction to denominator-side noise. In plain terms = company fundamentals did not deteriorate; markets over-priced during a data vacuum, and South Korea's deleveraging event spread liquidity risk.
This reflects institutional confidence in fundamentals — they see a "price correction," not a "trend reversal."
Danshui Spring's call: where is AI in its cycle?
Danshui Spring Capital (淡水泉投资) stated explicitly: "The tech-growth rally led by AI has not ended."
Short-term headwinds come from three sources: leading model capability gains are slowing, cloud vendors' capex sustainability is questioned, and memory price hikes are squeezing AI budgets.
Yet Danshui Spring argues AI is still advancing rapidly across model performance, falling usage costs, and broadening applications. The current phase is a transition from computing-infrastructure "first half" to "intelligent democratization."
This means → their logic is: the spend-money-building-data-centers phase is decelerating, but the phase where AI actually penetrates every industry is just beginning — capital will flow in a different direction.
How will market style shift from here?
The Industrial Securities survey shows the share of respondents favoring growth outperformance has declined; balanced allocation is now the consensus.
AI computing power remains a consensus trade, but willingness to go long dividend plays — high-yield, low-volatility defensive assets — has risen markedly.
In plain terms = institutions have not abandoned AI, but they are now holding offense in one hand and defense in the other — no more one-sided growth bets.
Content is for reference only, not financial advice.