As we approach the end of the year, the financial landscape has witnessed a remarkable surge in the popularity and overall size of Exchange-Traded Funds (ETFs), capturing the interest of a growing number of investors. This evolution in investment strategy indicates a significant shift in how individuals and institutions are deploying their capital.Recent data reveals that all listed ETFs in the market have reached a record size of approximately 3.65 trillion yuan, marking an increase of 1.6 trillion yuan since the beginning of the year. The total number of ETFs now exceeds one thousand, with 1,021 listed, up by 144 from the start of the year. It's noteworthy that stock ETFs alone drew in over a trillion yuan in net new investments, contributing to a total of 822 stock ETFs now available for traders.Throughout this year, there has been a clear trend of capital flowing into the stock market through index funds. By the end of the third quarter, the assets under management (AUM) of passive funds reached 3.2 trillion yuan, surpassing the 3 trillion yuan mark for active funds for the first time. The ratio of passive to active fund sizes has shifted dramatically, climbing from 20:80 at the end of 2021 to an even split of 50:50 recently, a development significantly bolstered by the increasing popularity of ETFs.A significant contribution to this ETF market expansion has come from large institutional investors, including insurance firms and other professional institutions. In 2023 alone, more than a trillion yuan in net new money has flowed into the ETF market, driving the total size well past the 3.65 trillion yuan threshold. Broad-based ETFs are leading the charge, with a share of 59%, accounting for 2.1 trillion yuan of the total ETF market.Notably, the recently launched CSI A500 Index has emerged as a frontrunner in attracting capital. As of November 29, this new index has registered a net buying streak for 34 consecutive trading days, producing a host of ten ETFs each exceeding 10 billion yuan in assets, making it the most significant index in terms of the number of massive-scale ETFs.The CSI A500 ETF, recognized as a leading product in this index, saw net inflows surpassing 12.5 billion yuan in November, landing it at the top of the market rankings. Moreover, during the period from November 18 to November 29, its average daily trading volume exceeded 2.1 billion yuan, and the trading turnover rate exceeded 25%, placing it among the most actively traded ETFs in its category.01Net inflow of 114.7 billion yuan in NovemberA500 ETF crowned as the "capital magnet"ETFs, known for their diversity, flexibility, low costs, high transparency, and constant innovation, are increasingly becoming the preferred investment vehicle for global investors.This year has marked the rise of a wave of index-based investment in the domestic market, with ETFs consistently setting new historical records!By the end of the third quarter, passive investment funds' holdings in A-shares have surpassed those of active funds for the first time in history. Meanwhile, large institutional players have continued to increase their stakes in broad-based ETFs, leading to net inflows reaching over one trillion yuan in the ETF market this year!The favorable policies introduced around September 24 triggered a rapid rally in A-shares, catapulting broad-based ETFs into the spotlight.The ETF fund rankings for November show that stock and cross-border ETFs collectively attracted around 56 billion yuan in net inflows, with the CSI A500 ETF emerging as the primary beneficiary, overtaking the STAR 50 ETF to become the second-largest index ETF in the entire market.Among the top 20 ETFs for net inflows, 14 are linked to the CSI A500 Index, totaling 117.4 billion yuan in net new investments, solidifying its status as a major source of incremental investment funds. The leading CSI A500 ETF has attracted over 12.5 billion yuan, ranking first market-wide. Industry insiders predict that the new generation of core broad-based indexes, represented by the A500, may ignite a renewed wave of index-based investing in the A-share market.Why the A500?02Balanced in offense and defenseCSI A500 ETF sets new recordsGlobally, the S&P 500 Index stands out as one of the most influential and recognized broad-based indices. Its focus on large-cap stocks along with careful consideration of industry distribution ensures comprehensive sector coverage and balanced allocation, lending it extensive market representation.The methodology used to compile the CSI A500 index shares numerous similarities with that of the S&P 500.In terms of industry distribution, the CSI A500 Index aims to closely reflect the overall market, covering 100% of the CSI secondary industries and 93% of the CSI tertiary industries, thus well diversifying risk and encompassing a wide variety of different sectors.Regarding stock market capitalization, the range of companies in the CSI A500 index varies significantly, from a market cap of 6.2 billion yuan to 23 billion yuan and is generally biased towards large-cap stocks. However, in compiling the index, the CSI A500 does not solely focus on large-cap sizes but also incorporates innovative growth companies and high-tech enterprises with potential breakthroughs.Data indicates that the CSI A500 index overlaps with 234 stocks in the CSI 300 index and shares 207 stocks with the CSI 500 index, in addition to including 43 constituents from the CSI 1000 index. Such a wide range of market capitalization gives the CSI A500 index a unique positioning of "rebalancing large and small-cap styles" over traditional broad-based indices.Historically, since December 31, 2004, the accumulated returns of the CSI A500 index have outperformed other mainstream broad-based indices over the last decade. Statistics from Industrial Securities show the A500's interval return rate at 388.4%, with an annualized return rate of 8.57%. In contrast, the annualized return rates for the Shanghai 50, CSI 300, and CSI 800 during this period were 6.28%, 7.60%, and 8.07%, respectively. As the most watched broad-based index in Q4, the release of related funds for the CSI A500 index has received enthusiastic responses from investors. Within 35 trading days of the index's announcement, related index funds surpassed the milestone of 200 billion yuan in scale, setting the record for the fastest index fund to reach this size in A-share history.Taking the GF Fund's CSI A500 Index fund as an example, the leading CSI A500 ETF has maintained attention from investors continuously since its listing on November 18, achieving a net inflow exceeding 12.5 billion yuan over a span of ten trading days. In its recent trading activity, the leading CSI A500 ETF has observed an average daily trading volume surpassing 2.1 billion yuan, with a turnover rate exceeding 25%, ranking high among its peers.The ability of the leading CSI A500 ETF to attract such capital can be attributed to its industry-balanced strategy, which encompasses both core assets and new productive capacities, blending growth and value investment approaches.03Growth vs. Value?Investors seeking balance amid market fluctuationsThe age-old debate of “value” versus “growth” investment styles remains a hot topic among global investors, triggering discussion and interest every so often.Reflecting on market styles this year, there was a clear preference for value stocks and high-dividend equities until September, whereas mid- and small-cap stocks lagged behind.However, this trend reversed with increasing market liquidity in October.The pivot in market style occurred on October 14, and since that date until November 28, the Shanghai 50 Index declined by 3.61%, while the CSI 1000 Index appreciated by 10.21%. Over a brief span of only 34 trading days, the style difference between large and small caps reached 13%.As the market warmed up, growth-focused broad-based funds attracted substantial capital inflows. The CSI 1000 ETF (560010), GEM ETF (159952), and STAR 50 ETF (588060) experienced net inflows of 9.7 billion yuan, 4.3 billion yuan, and 2.3 billion yuan this year, respectively. The CSI 1000 ETF (560010) tracks an index composed of 1,000 stocks from the A-share market, which are relatively small-cap and liquid stocks with a high content of specialized innovation.The GEM ETF (159952) tracks the classic GEM index, representing a typical growth-focused approach. This product has consistently attracted capital throughout the past eight quarters, with its number of holders growing to 41,637 by mid-year—illustrating the popularity of this ETF within its segment.From a fee perspective, both the CSI 1000 ETF (560010) and GEM ETF (159952) charge a management fee rate of 0.15%, positioning them among the cheapest ETFs in their respective class.The leading STAR 50 ETF (588060), focusing on sectors like semiconductor technology, has achieved continuous capital inflows for 12 consecutive quarters. Its index closely follows the STAR 50 Index, which targets large, liquid enterprises in the STAR market, characterized by industry concentration yet diverse stock inclusion, spotlighting firms exhibiting “hard-tech” features. Ultimately, for investors, whether favoring value or growth investments, there is no absolute superiority of one over the other. Warren Buffett famously introduced the concept of the “circle of competence,” underscoring the importance of investing within one’s area of expertise rather than indiscriminately venturing beyond one’s capabilities.Despite continued style rotation in the markets, 2023 has unveiled new characteristics in capital flows: investors are increasingly seeking balance amidst volatility.Net inflows this year have seen value-balanced broad-base funds like the leading CSI A500 ETF alongside emerging growth assets represented by products like the GEM ETF and STAR 50 ETF demonstrating a dual focus on both growth and value styles.This underscores a new characteristic of the A-share market; unlike previous trends, today's investors, armed with enhanced market awareness, are less inclined to concentrate investments in single sectors. Instead, they prefer diversified approaches, steering clear of an all-or-nothing pursuit of either absolute growth or unequivocal value.04In ConclusionAmong investors, many strive to accurately gauge market rhythms and capture every investment highlight, yet those who can flawlessly time their entries and exits remain scarce.Most individuals, navigating a market characterized by structural divergence and rotating hotspots, struggle to predict market style shifts or pinpoint lows and highs. As a result, many opt for asset allocation as a pragmatic strategy.On asset allocation, research has consistently shown that approximately 94% of investment returns come from broad asset allocation, highlighting the importance of focusing on larger class allocations.Nevertheless, since risk tolerance and investment objectives vary among individuals, tailored asset allocation strategies are equally diverse. As articulated humorously in the work "Blossoms," each individual can find their own "dock" in investment, encapsulating a key principle of asset allocation: “With three thousand rivers, finding one that suits you is paramount.”Translating this to fund investment, when macroeconomic and industry contexts shift, it becomes crucial to identify new anchor points for asset allocation and create a diversified asset basket aligned with one's objectives.