As the year draws to a close, the annual performance ranking battle in the fund industry is heating upPerformance rankings serve as a crucial tool for evaluating the investment ability of fund managers and companies over a given periodThey provide investors with valuable insights and can significantly impact investment decisionsHowever, market participants must approach these rankings with a sense of balance and rationalityWhile performance rankings are important, they should not be viewed in isolationIt is critical to consider long-term trends, examine the investment logic behind impressive returns, and understand the fund manager’s strategy and research capabilitiesSolely chasing rankings without deeper analysis can be misleading and ultimately counterproductive.

Fund companies place significant emphasis on performance rankings because a high position in these rankings can help build a brand, attract more investors, and increase assets under management

Many companies are particularly driven by the desire to grow their scale, but in doing so, some may stray from the original fiduciary responsibility of managing funds on behalf of clientsFund managers also benefit from strong rankings, as they often lead to both fame and financial rewardsFor investors, the rankings are a tool for identifying promising funds and, ideally, achieving the highest possible returnsIn this context, objective and fair performance rankings should benefit market efficiency and transparencyHowever, it is essential that these rankings reflect genuine improvements in investment research and strategy, rather than being artificially inflated for the sake of competition.

Looking at the industry from a broader perspective, it’s clear that the “performance ranking battle” has become less chaotic in recent yearsThanks to ongoing industry reforms and the increasing sophistication of investors, many of the more problematic practices have diminished

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Nonetheless, some concerning phenomena remainFor example, some fund products aim for short-term performance boosts by engaging in cross-sector investments, shifting strategies, or temporarily suspending new subscriptionsA number of niche theme-based funds, which are not currently popular in the market, often deviate from their stated investment mandates, leading to style driftAdditionally, funds marketed as “stable” or “value-oriented” may begin to invest heavily in trendy growth stocks, such as those related to artificial intelligence (AI), in order to boost short-term returnsAnother common occurrence is the manipulation of smaller, flexible funds that adopt aggressive investment strategies to gain a competitive edge in the rankings, often going so far as to suspend large subscriptions to maintain this advantage.

Even more troubling are the tactics some funds use to suppress the stocks of competitors or artificially inflate the value of their own holdings by manipulating cross-holdings or engaging in trading with related funds

In response to these unethical practices, regulatory authorities have ramped up efforts to crack down on such behaviorIn recent years, there has been a concerted push to reduce the overemphasis on “star fund managers” and flagship products, instead promoting a more balanced approach to investment management that encourages the development of integrated, team-based research capabilities and diversified strategies.

From the perspective of the industry, fund companies should recognize the changing investment environment and leverage performance rankings as a tool for positive reinforcementThe key to success lies in enhancing research and investment capabilities over the long termOne important step in this direction is to adopt long-term evaluation periods, such as 3-year or 5-year performance assessments, which focus on consistent performance rather than short-term fluctuations

It is encouraging to see that many leading fund companies are already moving away from the “star manager” mentality and are increasing the proportion of products evaluated on a longer-term basisSome companies are even exploring new performance evaluation metrics, such as compliance and risk control indicators, alongside economic and social responsibility factors, to more accurately align the interests of fund managers and investors over time.

Another vital area for improvement is enhancing the stability and sustainability of fund performanceIn the world of stock market investing, it is rare to find consistent “winners.” The phenomenon of the “champion curse,” where the top-performing fund in one year quickly fades into mediocrity the next, is a well-known occurrenceRelying on short-term tactics to boost rankings will inevitably lead to volatility, and this can harm both the fund's performance and its long-term reputation

Sustainable success in fund management comes from solid research, strategic planning, and careful risk managementIt is the steady and consistent growth that truly delivers long-term value to investors.

Finally, it is crucial for fund companies to communicate their investment philosophy clearly and build long-term relationships with investorsInvestment is a marathon, not a sprint, and endurance matters more than speedMore and more investors are now realizing the importance of a long-term, holistic approach to fund selection, rather than simply chasing short-term rankingsFund companies should prioritize understanding their investor base—focusing on factors like risk tolerance, investment horizon, and personal financial goals—and tailor their products and services to meet these needsOpen, transparent communication with investors, coupled with a strong commitment to long-term value creation, will foster trust and help build long-lasting partnerships.

Ultimately, time is the true test of success in the investment world