The Empirical Analysis Of Fund's Investment Strategy Based On China's Different Economic Cycles

China Southern Fund Management Company and Guotai Fund Management Company initiated the establishment of closed-end fund respectively in 1998. From then on, the securities investment fund industry in China has been built up. After years of development, the securities investment fund industry in China is entering into a new stage. In the past few years, the securities investment fund industry in China has gone through a brilliant time, and its asset management scale has expanded a lot. In general, the performance of fund managers is in the professional financial expert's level. Certainly, there are also some funds being not able to beat their performance benchmark. A fund manager can't perform well without effective asset allocation strategy. It helps fund managers to reduce negative effects from asset price volatility and reach their investment objective. It has been proved that the asset return level and volatility level both change with the economic cycles. According to it, this paper analyzed the fund's asset allocation strategy based on China's economic cycles.This paper is divided into four chapters, which reads as follows:Chapter 1 shows the background and significance of this research, the research status home and abroad and the innovation and shortage of this paper. Chapter 2 provides the research method of this paper. Firstly, China's economic operation is divided by the growth rate of industrial added value and CPI into four cycles:recession, recovery, overheat and stagflation. Secondly, Markowitz mean-variance method is used to establish programming model. Lastly, sample data in the empirical analysis is introduced and processed. Chapter 3 is the core of this paper. According to the return level and volatility level of stock and bond based on China's different economic cycles, with the help of EXCEL programming, the optimal investment proportions of stock, bond and cash are solved respectively in the four cycles: recession, recovery, overheating and stagflation. In this chapter, there is also discussion about the cash proportion of fund and the selection of stock based on China's different economic cycles. Chapter 4 makes the conclusion and investment advice. In this chapter, China's present economic cycle is also estimated, and the current investment strategy of fund is concluded.The empirical analysis result shows that when China's economy is in recession, the stock asset return proves negative. In order to make the portfolio return maximum given a certain risk level, fund managers are suggested to allocate most of their fund to bond asset after reserving a proportion of cash asset. When selecting stock asset, they are suggested to target defensive industries, such as transportation and warehousing. When China's economy is in stagflation, fund managers are still recommended to allocate most of their fund to bond asset. But the different is when selecting stock asset, they can pay more attention to the industries benefit from inflation, such as food and drink. When China's economy is in recovery and overheat period, the stock return from almost all industries is attractive. In order to make the portfolio return as much as possible and the portfolio risk as little as possible, fund managers are suggested to allocate most of their fund to stock asset and a small proportion of their fund to bond asset. If they want to improve the portfolio return level, some industries should be invested more, such as manufacture and real estate.Finally, according to the empirical results, China's present economic cycle is estimated, and the current investment strategy of fund is suggested:fund managers should consider investing less on stock asset and more on bond asset. When selecting stock asset, they had better to target defensive industries.