The recent introduction of Smart Beta indices by the China Securities Index Cohas generated considerable interest among investorsThese indices, including the China Securities 1000 Growth and Value indices, as well as the China Securities 2000 Growth and Value indices, represent a new wave of market strategies focusing on specific styles across varying scalesMany have expressed a desire for commentary on these new indices, prompting a detailed review to evaluate their performance and implications.

To begin with, a visual representation of the performance of these indices since 2014 is essentialThis analysis includes the China Securities 1000 Growth and Value indices alongside their composite and the Wind All-A IndexAll figures are adjusted for dividends, representing total return indices, which is critical for investors assessing real market performance.

The data illustrates that the China Securities 1000 Growth Index has closely mirrored the performance of the broader 1000 Index

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While it did demonstrate vigor during the bull market, subsequent downturns led to significant retracementsBoth the total return index and the growth index showed an annualized return in the range of 3% to 4% since 2014, lagging behind the Wind All-A Index, which boasted an annualized return of approximately 7.5% during the same timeframe.

What stands out, however, is the exceptional performance of the China Securities 1000 Value Index, which realized an impressive annualized return of 9.8%. This figure not only positions it as a standout in the market but also highlights the potential of value-focused strategiesIt is well-recognized that the 2014-2015 period marked one of the significant bull markets in the A-share market, yet valuations and performance metrics remained pivotal in assessing long-term strategies.

Post-2016, the performance narrative shiftsAn examination of the same indices from 2016 onwards reveals a stark contrast

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The Wind All-A Index barely managed to achieve positive returns, and the performance of both the 1000 and the 1000 Growth indices was considerably disheartening, with annualized losses exceeding -4%. Conversely, the China Securities 1000 Value Index stood resilient, registering over 2% in positive returns—a notable achievement in a challenging market environment.

From a long-term investment perspective, the China Securities 1000 Value Index displays substantial merit relative to its Growth counterpart, which may appeal more to those inclined towards speculative trading within ETF marketsTo encapsulate, while the Growth Index showcases potential for short-term gains, the Value Index reveals a more sustainable approach to wealth accumulation over time.

A year-by-year analysis indicates that between 2019 and 2020, the 1000 Growth Index exhibited a notable burst in returns, akin to the vibrant market of 2015. Carrying over the momentum from the earlier discussion regarding value, one must also consider the existence of the China Securities 1000 Value Stable Index

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This is a tailored index co-created by Huaxia Fund in collaboration with China Securities Index Co., and it serves as a counterpart to the Growth Innovation Index.

Delving deeper, the newly launched China Securities 1000 Value Index contrasts significantly with the previously designed Value Stable IndexThe former is structured around traditional metrics such as dividend yield, price-to-book ratio, earnings-to-price ratio, free float market capitalization, and cash ratioThis methodology gathers 200 stocks with the highest scores based on standard valuation measuresIn contrast, the Value Stable Index applies a more modern framework, filtering for liquidity and quality before assessing for a range of factors, including value and volatility, which positions its constituents as both high-quality and stability-oriented investments.

In summary, where the 1000 Value Index is focused on value scoring, the 1000 Value Stable Index combines quality, value, and volatility factors, effectively creating a diversified composite that emphasizes stability and growth potential

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The weighting methodology further enhances this differentiation whereby traditionally, the Value Index utilizes free float market cap to adjust values, while the Stable Index dynamically adjusts based on factor scores, setting it apart in thought and implementation.

When we assess the historic performances, the annualized yield of the 1000 Value Index reached 9.8% since 2014; however, it substantially pales in comparison to the over 14% annualized yield achieved by the 1000 Value Stable IndexIt’s evident from the long-term performance that the latter has climbed to new heights, easily surpassing the pre-2015 peaks, while the traditional Value Index has struggled to reclaim its past gloryThe period beginning in 2016 reveals a narrowing gap, yet the Stable Index still presented 4.66% annual returns versus 2.11% for the Value Index, reaffirming the modern indices' superiority over traditional approaches.

Turning our attention to the newly introduced China Securities 2000 indices, they too deserve consideration

The value setup here allows them to engage effectively with the China Securities 1000 Value Stable Index in performance from 2014 onwardHowever, a cautionary note—its maximum drawdown remains substantially larger than the former indicesIn the performance windows post-2016, the 2000 Value Index appears favorable against the 1000 Value Index but lags the Stable Index, validating that while lower market cap can yield excess returns in bullish trends, complex market structures benefit more from diversified, multi-factor approaches.

In reflecting on growth investments, the 1000 Growth Innovation Index undeniably remains superior when compared with the recently launched 1000 and 2000 Growth IndicesThe latter have struggled despite the smaller size advantage offered by the 2000 indexNotably, even in a focus period from 2016, the gap further widens, with the 2000 Growth Index yielding more than four percentage points lower than its innovative counterpart.

A further examination of annual performance reveals that between 2019 and 2020, during a fundamental market uplift, the 1000 Growth Innovation Index once again outperformed both its 1000 and 2000 rivals, particularly falling back only in 2021. To further contextualize this, a convened comparison of the China Securities 300 indices showcases the same trend; the Wind 300 Value series competes closely but reveals a significant divergence in the growth arena, with the Growth Innovation Index dominating with annualized excess returns well beyond 2.5 percentage points compared to the traditional Growth Index.

The progressive rollout of these indices by Huaxia Fund effectively illustrates the establishment of an ecosystem of exchange-traded funds (ETFs) tailored for these market segments

However, a critical insight emerges—while Smart Beta strategies promise performance superiority, they often encounter challenges translating into significant retail investment interest, partly due to the complexity surrounding their operational frameworks.

Despite the complexities, personal investment strategies endorse the value and growth offerings within this niche of Smart Beta ETFsI maintain positions in the 1000 Value Stable and 1000 Growth Innovation ETFs, underscoring a nuanced understanding of liquidity managementIt is essential to note that ETF liquidity should not solely rely on daily transaction volumes; the presence of market makers facilitates trades by providing orderly buy-sell spreadsObservations reveal that typical transaction sizes maintain fluidity akin to conventional investment avenues without significant friction for smaller investors.

In conclusion, the Smart Beta categorization serves best for strategic long-term positioning, allowing for some tactical readiness