Since the beginning of 2025, the backdrop of rising technology and artificial intelligence sectors has led to a puzzling trend in the financial marketsAccording to Wind data, a staggering three-quarters of the investment funds bearing names that include the terms “dividend” or “income” have not reported any positive returns within this calendar year.

Dividend funds specifically have taken a hit as several indices associated with dividend strategies have experienced slight declines over the monthsAs of February 14, 2025, the Shanghai Dividend Index and the CSI Dividend Value Index recorded cumulative decreases of 4.59% and 4.36%, respectivelyWithin the same timeframe, indices such as the CSI Dividend Index, the Shanghai Total Return Dividend Index, and the CSI Low Volatility Dividend Index are similarly showing around a 4% drop, with respective losses of approximately 3.98%, 3.94%, and 3.82%.

Contrasting these figures, major stock indices have revealed a different storyThe Shanghai Composite Index, the Shenzhen Composite Index, the CSI 300 Index, and the CSI A500 Index noted very minor fluctuations, with cumulative returns by February 14 at -0.15%, 3.22%, 0.10%, and 1.45%. More starkly, indices linked to growth stocks, such as the Beijing Stock 50 Index and the STAR 50 Index, have demonstrated cumulative increases of 18.60% and 3.39% within the same timeframe.

Delving deeper into the performance of publicly offered funds, Wind’s comprehensive data shows that there are 235 established funds featuring “dividend” or “income” in their names (noting that different classes of the same fund are counted once). Among these, only 57 funds—equating to roughly 24.26%—managed to achieve a positive yield since the start of the yearThis data underscores that a predominant majority, around three out of every four funds, have yet to record upward returns in 2025.

By the same date, several funds classified under “dividend” or “income” were reported to have negative annual returns less than -5%. For example, the Yongying Dividend Preferred Fund, managed by fund manager Xu Tuo, displayed a return of -5.82% in 2025; notably, this was a stark contrast from their impressive 27.36% return in 2024. At the end of the fourth quarter of 2024, the fund was significantly invested in Hong Kong stocks, with approximately 40.04% allocated to stocks in the utility sector and about 49.17% directed towards A-share equities, of which 25.21% was in the “Electricity, Heat, Gas, and Water Production and Supply” sectors.

In the Yongying Dividend Preferred Fund’s Q4 2024 report, manager Xu Tuo reaffirmed a commitment to a high allocation of power operators

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By February 14, the price performance of the fund’s top ten holdings were quite discouragingNotable companies such as CGN Power (Hong Kong), Huadian International Power (Hong Kong), and Huaneng International Power (Hong Kong) faced annual declines of approximately -13.68%, -7.50%, and -4.67%, respectivelyStrikingly, only China Mobile (Hong Kong) saw a positive annual price movement among these holdings.

Similarly, as of February 14, the ICBC Dividend Preference Fund and the Shanghai Industrial State-Owned Enterprise Dividend Fund reported year-to-date returns of -5.73% and -4.73%. According to the ICBC Dividend Preference Fund’s Q4 report for 2024, its investment strategy prioritized dividend-generating infrastructure sectors including electric power, airports, roads, railways, ports, telecommunications, water, and gasA glance at its top holdings reveals considerable overlap with those of the Yongying Dividend Preferred FundThe Shanghai Industrial State-Owned Enterprise Dividend Fund’s Q4 report confirmed its commitment to high-dividend, low-valuation state-owned enterprises, particularly in sectors like banking, transportation, coal, and electricity.

In addition to actively managed equity funds, certain dividend-themed ETFs and their corresponding sub-funds have also witnessed losses exceeding -4%. For instance, funds such as the GF Shanghai State-Owned Enterprises Dividend ETF and other related ETFs bracketed annual returns within the -4% to -5% range as of February 14.

The effectiveness of a “barbell strategy,” which has gained traction in recent years, is now under scrutinyA research report by Huachuang Securities released on February 9 analyzed the downward trends in coal, transportation, and banking sectors as vital forces propelling the decline of dividend assets over the past monthAs profitability estimates for 2025 have been revised downward in sectors like petrochemicals, coal, utilities, and transportation, there seems to be a growing pressure on the earnings forecasts due to the weak price factors within the ongoing PPI adjustment period.

When examining sector-specific performance through the lens of the CSI Shenwan Coal Index, Shenwan Transportation Index, and the CSI Banking Index as of February 14, the figures show cumulative returns of around -8.60%, -3.96%, and 0.71% since the start of the year.

Moreover, Huachuang Securities noted that current funds in circulation are oscillating between AI and dividend assets

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Data indicates that transaction volumes and turnover rates for the TMT Index are on the rise, while those for the CSI Dividend Index have been on the decline.

In recent years, several public fund managers have highlighted the barbell strategy as a viable investment approach during educational sessions for investorsMa Yue, a senior researcher and investment assistant at the Index and Quantitative Investment Department of Bosera Fund, emphasized that the barbell strategy aims to create an asset allocation profile resembling a dumbbell, meaning heavier investments at both ends with lighter allocations in the middle segmentThis strategy seeks to offset risks and returns by investing in two types of assets with different risk profiles simultaneously.

Currently, while growth sectors typified by technology stocks are thriving, the value represented by dividend strategies has yet to exhibit robust performanceMa Yue elaborated on the “dividend + growth” dimensions of the barbell strategy, emphasizing that it’s designed to balance risks through a mixed investment in high-growth assets along with defensive dividend stocksHigh-growth assets, such as tech stocks, focus on capital appreciation, whereas defensive assets provide necessary cash flow through dividends.

He advised investors to strategically balance their holdings of dividend versus growth assets based on their risk tolerance and investment goalsThose with lower risk preferences might lean towards dividend-generating assets, while those chasing higher returns may benefit from increasing their exposure to growth-focused investmentsThe implementation of a diversified allocation strategy aimed at risk dispersion, combined with a commitment to long-term holdings alongside periodic adjustments to one’s portfolio, is recommended for optimal outcomes.

Moreover, Gu Yu, a fund manager at Nord Fund, recently expressed optimism regarding both technology and dividend sectors in 2025. For dividend assets, China is currently in a low-interest rate environment, and the downward trend in benchmark risk-free rates is a boon for high-dividend assets

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