Juejin Low-Volatility "Fixed Income+" Draws the Absolute Return Curve

Against the backdrop of stock-market volatility and falling returns on wealth-management products, interest in “fixed-income plus” that combine offense and defense has been growing day by day. Some fund companies with advantages in the quantitative space have begun trying to inject quantitative methods into the “fixed-income plus” arena, opening up a new track for quantitative “fixed-income plus.” The quantitative team at Boxdo Fund is a deep explorer of this track. In Liu Weiming’s view, a disciplined quantitative model naturally aligns with the “fixed-income plus” goal of “controlling drawdowns and seeking steadiness,” thanks to its stringent risk constraints and objective investment discipline. Boxdo Fund’s “Ying” series of new “fixed-income plus” products—Boxdo Ying Sheng Hybrid Fund and Boxdo Ying Equity and Bond Fund—will be issued simultaneously in April. When he spoke in an interview with China Securities Journal’s reporter, he said that the two “Ying” series new products released this time will continue the team’s exploration in the low-volatility “fixed-income plus” space. The aim is to draw for investors a net-value track with smaller volatility and stronger all-time-high capability, by leveraging a distinctive absolute-return stock-selection strategy and a resilient bond core holding.

Boxdo “Index+” Adds Another New Product

Liu Weiming said that, whether from product positioning or from the perspective of user needs, “fixed-income plus” products must first have the ability to generate absolute returns. Only on that basis should one consider how to offer robust or flexible solutions according to different investors’ needs. Based on this understanding, Boxdo’s quantitative team has planned a “fixed-income plus” product lineup spanning low volatility, mid volatility, and high volatility. All of them are positioned as absolute-return-oriented, striving to pass through market cycles.

As the first batch of “Ying” series products planned for issuance, and as a new member in the absolute-return category positioned at low volatility within Boxdo Fund’s “Index+” product matrix, the products will strictly follow a relatively fixed allocation ratio between stocks and bonds. They will build a typical “fixed-income plus” product centered on bond assets, with equity assets used to enhance performance.

How does the product achieve its absolute-return objective? Liu Weiming explained its two notable features.

First, the fixed-income side’s objectives are pragmatic and conservative—guarding the “main base.” Liu Weiming said that bonds are the product’s ballast. The team will not proactively take on credit risk, and will not “sink” into lower-quality credit. The strategy works by using sampling to replicate the mid-to-short-term China government bond index and layering active management to reduce the degree of volatility. The overall goal is to achieve average performance comparable to other pure-bond funds. In addition, subject to discretion, it will consider investing in a certain proportion of convertible bonds. Through “quantitative model-based timing + multi-factor stock selection,” the aim is to contribute more diversified returns and further improve the portfolio’s Sharpe ratio and the investor experience of holding it.

Second, the equity side focuses on an absolute-return stock-selection strategy. Liu Weiming believes this is the battlefield where Boxdo Fund’s quantitative investment team can best leverage its core strengths. “In a low-interest-rate environment, the difficulty of achieving significant excess returns on the bond side gradually increases. In the future, the performance differences among ‘fixed-income plus’ products will largely depend on how the stock position is managed.”

Control Volatility First, Then Seek Returns

In Liu Weiming’s view, to complete its absolute-return objective, the core strategy on the “Ying” series stock side can be summarized in two steps: control volatility first, then seek returns.

The first step is to reduce volatility, aiming to build a stock pool with a high margin of safety so that the portfolio is more closely aligned with an absolute-return orientation. Liu Weiming said that the relevant strategy draws on the index-construction logic of mature dividend low-volatility indices in the market (such as the DBJ dividend low-volatility index) and free cash flow indices, and further optimizes and upgrades them through Boxdo’s quantitative models. From all stocks in the entire market, the team selects based on three dimensions: first, “cheap,” meaning low valuation and high dividend yield; second, “steady,” meaning stable operations, ample cash flow, and high financial quality; third, “low volatility,” meaning the stock’s historical volatility is relatively low.

“How do we judge whether buying a stock is easy to ‘step into a trap’?” Liu Weiming gave an example: “We have a dynamic monitoring financial-risk early-warning model covering all stocks in the market. Every day, we update the ‘blacklist’ and remove stocks with flaws in financial quality from the pool.” After screening across the whole market using the first three dimensions, and then applying a stringent filtering model, the team ultimately forms a low-volatility stock pool containing 300 to 500 stocks. This pool itself already has characteristics such as high Sharpe ratio, high Calmar ratio, and low drawdown, laying a solid safety foundation for enhancing returns later.

The second step—“enhancing returns”—reflects the core capability of Boxdo Fund’s quantitative “Index+” system. Liu Weiming said that within the initially screened low-volatility stock pool, the team performs a second round of selection using the quantitative framework that Boxdo’s quantitative team has validated through 14 years of live, in-the-market execution. The team selects a group of top “standout” stocks that receive the highest scores from the quantitative model and have stronger expected returns, thereby constructing the final portfolio.

Liu Weiming further explained that Boxdo Fund’s quantitative investment team currently uses a “double equilibrium” multi-factor model framework. The term “double equilibrium” is reflected on two levels. First is equilibrium at the methodology level: based on traditional multi-factor models that rely on manually extracted factors and on end-to-end (AI full-process) models that use artificial intelligence technologies, the two frameworks are allocated in balanced proportions, complementing each other. Second is equilibrium at the factor level: the model captures momentum factors that reflect fundamental trend and mean-reversion factors that dig into valuation and the reversion of price to value; it maintains balanced allocation over the long term.

Although this “double equilibrium” framework appears to give up the opportunity to bet on a particular market style factor to achieve an extreme ranking, it enables Boxdo’s “Index+” series products to maintain long-term, sustainable excess returns. “In the past, we’ve seen some teams perform outstandingly because their style or factor exposures highly matched a given year’s market. But in years when style reverses, they may also face huge challenges.” Liu Weiming said. Boxdo Fund’s approach relies on strict style constraints and balanced allocation. By continuously iterating and improving the quality of each factor, the team accumulates excess returns over the long term. This philosophy is also embodied in the management of “fixed-income plus” products, aiming to provide investors with a return experience that is predictable and subject to smaller volatility.

“Fixed-income plus” Sees a Good Time for Allocation

When discussing the current market, Liu Weiming analyzed the allocation value of “fixed-income plus” products from both the stock and bond sides. On the bond-market front, the economy shows further signs of recovery. The monetary-policy environment is expected to remain somewhat accommodative, and the risk of a large rise in interest rates is limited. With liquidity support, mid- to short-maturity bonds are expected to provide sustainable coupon-income returns. This makes them suitable as a core holding for “fixed-income plus,” laying the foundation for portfolio returns.

On the stock-market front, Liu Weiming believes that after experiencing volatility, A-shares are in a mild recovery cycle in which company performance is gradually being repaired. There are structural opportunities in sectors such as technology and consumer. By allocating a small proportion to equity assets, “fixed-income plus” products aim to capture these structural opportunities and, under strict drawdown control, strive to enhance overall returns.

“Overall, both stocks and bonds have opportunities for positioning, and ‘fixed-income plus’ products are entering a favorable allocation window.” Liu Weiming concluded. For low-volatility “fixed-income plus” products, the positioning is as the ballast in an investor’s asset portfolio—helping investors capture opportunities on both the stock and bond fronts amid uncertainty, while pursuing long-term, steady growth in assets.