BEIJING – Quant funds in China have become so popular that they are being deluged with investors’ money.
Ubiquant, one of the top players, raised 2.6 billion yuan (S$495 million) in less than two hours for a new fund in May, according to people familiar with the matter. Investors also snapped up over 100 million yuan of a product from Shenzhen ChengQi Asset Management within seconds, a product distributor said.
They’re not alone. Quants’ assets under management have more than doubled in less than a year to more than 2.6 trillion yuan. The frenzy is being fuelled by the success of their rapid adoption of artificial intelligence.
A quant fund (short for quantitative fund) is an investment fund that relies on mathematical models, statistical analysis, and computer algorithms to make investment decisions instead of a human manager’s intuition or traditional research.
While Chinese investors have traditionally favoured star managers over computer models, in 2025 the machines trounced humans by more than 20 percentage points. The funds are churning out new products that are being snapped up by investors who are abandoning stock pickers.
“Quants’ breadth in covering thousands of stocks has prevailed over the depth of research pursued by discretionary long-only managers,” said Chen Xu, chief operating officer of BigQuant.cn, a technology provider. “Quants have finally become mainstream and there’s no turning back.”
This has led to the explosion of investing products offered. New quant products more than doubled in 2025 to 6,296, accounting for 46 per cent of all new hedge funds, according to an Industrial Securities report in January. Among the more than 3,000 new products registered by top managers, more than 80 per cent were launched by quants.
The success of quants in China’s 8 trillion yuan hedge fund industry is a stark reversal from two years ago. The sector had been hit by a series of management failures, drawing the ire of government regulators. The funds were blamed for excessive volatility and market blowups. The exchanges cracked down on the use of high-frequency trading to circumvent transaction limits and tightened supervision of leveraged products.
One dramatic example is the turnaround of Ningbo Lingjun Investment Management Partnership. In early 2024, its trading models executed a highly concentrated batch of sell orders that triggered exchange penalties and plunged the firm into a crisis.
In response, Lingjun forced portfolio managers to meet stricter risk parameters for their algorithms and started real-time monitoring of firmwide trading data. It also added shorter-horizon signals alongside medium- and long-term models.
As a result, the company last year led the rankings among top quants with an average return of more than 70 per cent, according to Shenzhen PaiPaiWang Investment & Management, a consultancy that tracks hedge funds in China.
Investment logic has shifted from “choosing quant” to “choosing the quant with the strongest AI capabilities,” making it natural for inflows to concentrate more on the top players, according to Guolian Minsheng’s report. Consequently, the funds are fighting to hire the best science and engineering students as they race to build and improve their own proprietary models.
Traditional stock pickers are also racing to adapt. Shanghai Minority Asset Management exemplifies the trend to embrace AI. It spent five years transforming from pure discretionary stock-picking to relying on AI agents. It trained the models on its core investment thesis – “excess returns come from the majority’s cognitive biases” – then used the agents to autonomously mine factors that identify those biases faster.
“The moat that once protected us has become a walled prison,“ the company said in an article in May on its WeChat account, citing founder Zhou Liang. “Evolution is not a choice – it is a matter of life and death.”
For foreign asset managers, the implications are clear; it is difficult to raise money without a quant strategy. Of more than 30 global firms operating a hedge fund business onshore in China, only a handful including Two Sigma and D. E. Shaw run fully systematic strategies. The rest, predominantly fundamental managers competing on research depth and brand recognition, are mostly still struggling with less than 500 million yuan in assets.
As investing moves to machines competing against machines, and quant funds scale up, beating the market will inevitably become more difficult.
One of the quant funds’ most popular products is an index-enhanced fund, which tracks an index and uses algorithms to shift the weightings of individual companies in an attempt to outperform the underlying benchmark.
The average excess return from that strategy shrank by more than half from a year earlier to 4% this year through April 30, with some managers barely generating any alpha after October, according to PaiPaiWang. Only 14 per cent of such products recorded positive excess returns every month since then.
“As China’s capital markets continue to mature and pricing efficiency improves, the threshold for quant managers to generate excess returns will inevitably rise,” Shanghai Mengxi Investment Management, a quant fund that has posted monthly gains since October, said. “This is a challenge many quant managers will have to confront.” BLOOMBERG
