Following the Lunar New Year holiday, China's A-share market has shown a persistent trend of fluctuating recovery. This resurgence has been particularly evident in the technology sector, where robust profit-making opportunities continue to thrive. The vivid trading activity in individual stocks highlights the increasing vibrancy of the market. Against this backdrop, information compiled from various institutional channels, as well as the perspectives within the quantitative private equity sector, reveal that the performance of quantitative enhancement strategies has been commendable. Despite the pronounced structural strengths in the market, the majority of leading quantitative private equity products have outperformed their benchmarks, showcasing remarkable adaptability to market conditions. Many quantitative private equity firms are maintaining an optimistic outlook for the further recovery of the industry's scale throughout the year.

As early as the beginning of 2025, a favorable performance trend has emerged. Recent performance monitoring data obtained by a China Securities Journal reporter from various channel institutions indicates that up until February 14 (the prior Friday), a significant number of quantitative private equity firms have outperformed benchmark indices. Specifically, among the quantitative enhancement strategies linked to the CSI 300, CSI 500, and CSI 1000 indices, nearly all of these firms have reported positive excess returns since the year's start. In particular, on the CSI 1000 quantitative enhancement strategy, an impressive 11 out of 12 monitored firms achieved positive excess returns, with 9 firms recording excess returns exceeding 2.5%, and an extraordinary high of 10.35%. Firms such as Mingrong Investment, Black Wing Asset, Stabo Investment, and Xingkuo Investment have emerged as leaders in performance, while companies like Jiqi Investment and Sishen Investment have not fared as well.

Reviewing January alone, further performance tracking conducted by a third-party agency reveals that quantitative private equity's index-enhanced products demonstrated stability. Out of 581 index-enhanced products showcased on this platform, the average excess return for January stood at 2.11%. Remarkably, 527 of these products achieved positive excess returns, accounting for approximately 90.71% of the total.

A prominent figure from Mingxi Investment noted that since the year's onset, trading activity in A-shares has remained lively, and the performance of quantitative enhancement strategies' excess returns aligns with expectations while also revealing a degree of differentiation. Notably, the CSI A500 enhancement strategy has attracted significant attention as a new avenue, displaying noteworthy overall performance. Meanwhile, the strategies that focus on small- and mid-cap stocks have shown considerable susceptibility to shifts in market style.

Wang Li, the general manager of Nianjue Asset, expressed that the ongoing recovery of excess returns in quantitative private equity strategies can primarily be attributed to increased market volatility, amplified trading volumes, and a general contraction in overall quantitative trading scales. As crowding reduces within specific avenues, the excess returns for quantitative enhancement strategies have enjoyed this "mini-spring".

The conditions favoring the market remain advantageous for these strategies. A representative from Mingrong Investment stated that the market environment since 2025 has permitted quantitative models to adapt effectively through diversified holdings and strong responsiveness. Generally, quantitative trading involves a wide range of stock selection across the entire market, ensuring a low concentration with a broadly diversified portfolio. Therefore, amid conditions characterized by higher trading volumes, pronounced volatility, and a preference for mid- to small-cap stocks—often trailing behind more liquid growth equities—quantitative enhancement strategies are positioned to excel, typically yielding more substantial excess returns.

Joint founder Zheng Yao of Stabo Investment noted that recent months have witnessed a general warming in market sentiment, greatly benefiting small-cap stocks, attracting considerable capital and consequently uplifting relevant sectors. This trend has also opened doors for quantitative strategies to seize chances for excess returns.

Insights from Mingxi Investment further elaborate that in this current landscape dominated by tech growth and small-cap focus, the strengths of quantitative investments become distinctly visible. On one hand, quantitative models thrive on market fluctuations and trading turnover, where the high volatility inherent to the tech growth sector enhances factor differentiation. Coupled with the improved liquidity of small-cap stocks, this factor efficacy strengthens. On the other hand, quantitative strategies typically spread their investments across numerous stocks, employing risk models to dynamically adjust for style drift, allowing for flexible exposure and stock allocations based on market style fluctuations, thus mitigating risks tied to specific industries or individual stocks. This approach aids in maintaining the sustainability of excess returns, at least to some degree. However, as the small-cap quantitative enhancement arena experiences an influx of participants, there may be challenges in terms of crowded strategies, necessitating continuous technological enhancements and strategy updates by quantitative managers to combat market risks effectively.

Zheng shared insights into the divergence among top-tier quantitative private equity firms. Over the first two months of the year, disparities in excess returns among mainstream enhancement strategies have exceeded 5 percentage points, which reflects significant variances in effectiveness, risk management, cost control, and strategy execution across similar institutions.

Analysis from Wei Mingsan, general manager of Dil Wei Private Equity, indicates that recently, various quantitative models have showcased differing degrees of adaptability regarding market style. The sensitivity of these models to factor selection plays a pivotal role in performance variation. For instance, teams employing public sentiment-related factors or high-frequency volume-price factors are typically quicker to capitalize on market shifts, adeptly capturing style rotations—especially in rapidly evolving information landscapes. Conversely, those reliant on traditional factors or stricter risk controls may struggle to keep pace with swift market changes, sometimes facing constraints from their own risk management frameworks.

As interest in quantitative enhancement strategies rises, insiders report that the overall asset management scale within the quantitative private equity sector has also shown growth. Recently, the appetite for these strategies from institutional channels has surged alongside an uptick in market beta and enhanced overall performance. Given this year's anticipated market trajectory and the growing investor familiarity with quantitative strategies, the quantitative sector is poised for noteworthy growth.

Representatives from Mingxi Investment indicated that since 2025, propelled by favorable policies and market rebounds, interest in enhancement strategies continues to amplify. This uptick has notably manifested in an increased demand for mid-sized enhancement products and CSI A500 strategy offerings.

As Wang Li proposed, with the return of market profitability trends, enthusiasm for quantitative enhancement and stock-selecting strategies has intensified since the start of the year. Should the positive performance in A-shares persist throughout 2025, the investment value of quantitative private equity products is likely to receive broader market recognition, which could lead to a marked expansion of the industry’s scale compared to last year.

The recent rapid advancements in artificial intelligence (AI) technologies have also influenced perceptions within the industry. Zheng noted that the popularity of DeepSeek has generated more attention for quantitative investments, as diverse investors are beginning to recognize the technological dimensions of quantitative managers. Coupled with expectations of favorable A-share performances this year, the quantitative private equity sector may experience a significant revival in scale.

Moreover, according to Wei Ming San, should the market maintain high trading volumes in 2025, a resurgence in the quantitative private equity industry's scale seems likely. However, notable disparities are anticipated; teams could find their performance gaps widening even further. Certain groups may stand out in an increasingly competitive market environment due to their precise strategies and adept risk management, while others might face heightened challenges.