When Huaxia Fund’s “Dual-Engine Leading” product launched in November 2020 it promised a simple sell: concentrate on two secular winners — technology and consumption — and let growth do the heavy lifting. The fund raised roughly CNY 3 billion at a time when China’s market favoured concentrated, high-growth strategies. Yet as markets rotated and the A‑share rally that began in September 2024 gathered pace behind an AI-led rotation, this flagship product remained stuck deep in the hole, with cumulative losses approaching half its value and a maximum drawdown that still sits near 70 percent.
The fund’s troubles trace back to its first manager, Liang Hao, a market celebrity within Huaxia who had delivered spectacular returns for other products during the 2019–21 structural rally. Liang’s style was unmistakeable: aggressive, high turnover and heavily concentrated in growth sectors such as pharmaceuticals, food and beverage, and electric equipment. Those bets paid off earlier in the cycle, but when the market favoured different pockets of growth — notably new energy between 2021 and 2022 — Liang’s differentiated positioning left the fund badly exposed and out of step with the dominant trend.
Performance quickly deteriorated. The fund reported a roughly 8 percent loss in 2021 while similarly branded strategies posted gains; by the first quarter of 2022 it had suffered a 23.4 percent drop. Under mounting pressure, Liang abruptly abandoned all his fund roles mid‑2022, including one product he had managed for only 111 days. The sudden mass departure highlighted not only the fragility of star-manager models but also weaknesses in succession planning and internal controls at the firm.
Huaxia responded by appointing a successor, Gao Bing, who moved decisively in the second quarter of 2022 to exit new energy exposure and reweight the portfolio toward software, communications, healthcare and nascent AI infrastructure themes. Those changes reflected an attempt to recalibrate in anticipation of longer-term secular trends, but they arrived during a prolonged bear phase for the market. The product lost another quarter of its value in 2023 even as other funds managed by Gao experienced even steeper declines, underscoring how timing, position sizing and fund‑specific histories can produce divergent outcomes even from similar playbooks.
A further shift occurred when Zhang Xiao took sole management in mid‑2024. Facing a product with a battered net asset value and a damaged investor base, Zhang adopted a cautious, fragmented allocation that cycled through electronics, medicine, military and household sectors without a clear, consistent thematic spine. When the AI-led rally crystallised in 2025, the fund was slow to load up; it only meaningfully increased AI-related positions after the main run had passed. The lagged response produced a modest 22.1 percent return in 2025, insufficient to restore investor confidence or materially repair the long-term track record.
This episode matters beyond a single product. China’s asset management industry has expanded rapidly and retail investors are increasingly concentrated in thematic funds sold on simple narratives tied to a manager’s persona. The Huaxia case exposes three structural risks: first, the reliance on star managers without robust institutional processes; second, the danger of strategy drift and inconsistency between stated philosophy and trading behaviour; third, inadequate succession planning and disclosure when personnel change.
For investors the lesson is plain: assess funds by process and consistency as much as past headline returns. For fund houses, the imperative is to fortify investment governance — clearer mandates, stronger risk controls, and transparent handover protocols — to prevent a repeat. Regulators, too, have reason to take note: large, sustained losses in high‑profile retail products can erode trust in capital markets and invite tighter oversight of product governance and performance disclosure.