# Hot Money's "Presence" Fades, All Because They Can't Beat Quants? Insiders: Quants Have Dominated the Market's "Micro-Pricing Power"

Recent reports suggest that as the activity of retail funds in the A-share market declines, the era of retail speculation is coming to an end, sparking widespread discussion. By the end of February 2026, the number of domestic private equity firms with assets exceeding 10 billion yuan reached a record high, with quantitative private funds surpassing subjective long-only funds for the first time.

Some private fund industry insiders believe that quantitative strategies, with their speed, discipline, and full-market coverage, have dominated in high-frequency trading, micro-fluctuations, and the battle of limit-up and limit-down, greatly shrinking the space for traditional methods like stock picking, relay trading, and emotion-driven trading. Additionally, quant funds rely on dedicated channels, millisecond-level order placement, and algorithms capable of accurately capturing market sentiment—comparable to “driving a sports car in a pedestrian street,” which puts ordinary retail investors and subjective funds at a disadvantage in the micro-price-setting game.

The rise of quant funds has diminished the presence of retail funds

As of the end of February 2026, there were 126 private equity firms with over 10 billion yuan in assets in China, most of which are now quantitative funds, marking the first time their number has exceeded that of subjective long-only funds.

Meanwhile, the “Daily Economic News” has observed a growing circulation of opinions such as “the end of the retail fund era” and “quantitative strategies changing retail rules.”

Data from the龙虎榜 (Top List) since the beginning of the year shows a decline in retail fund activity. In January, the average number of stocks traded daily by retail funds on the list was 72; in February (with fewer trading days), it dropped to 58; and by March (up to the 19th), it further decreased to 57. Notably, on January 12th, the number of stocks traded by retail funds on the list peaked at 106.

Furthermore, the decrease in “consecutive limit-up” stocks also indicates reduced retail fund activity. According to Choice data, since the start of the year, only 15 stocks in the A-share market have experienced more than five consecutive limit-ups; in contrast, in Q3 and Q4 of last year, there were as many as 20 and 35 stocks respectively with more than five consecutive limit-ups.

Regarding this phenomenon, Shu Qiquan, General Manager of Qianbo Asset in Shanghai, told reporters: “As a subjective trader, I believe that the idea that ‘the market is fully controlled by quant funds and human traders have surrendered’ is an exaggeration, but the short-term ecosystem has indeed undergone an irreversible change. The recent decline in retail activity and weakening of the limit-up effect are the result of the combined influence of quant pressure, stricter regulation, and market structural changes. Quant strategies leverage speed, discipline, and market-wide coverage to dominate in high-frequency, micro-fluctuations, and limit-up/limit-down battles, significantly reducing the survival space for traditional stock picking, relay, and emotion-driven trading—this is an objective fact.”

He also believes that current quant strategies are impacting market structure.

“First, the daily average trading volume of quant funds in A-shares accounts for 30%-40%, which is widely recognized in the industry. This volume is enough to alter micro-trading structures, such as thinner order books, more intense volatility, easier stop-loss triggers, and amplified short-term sentiment. From this perspective, quant strategies indeed increase the risks of market crashes and herd behavior, especially in stocks with moderate liquidity, where these distortions are more obvious. Second, the claim that quant strategies ‘depart from value investing’ is fundamentally true. Most high-frequency quant funds focus on statistical arbitrage, trend following, and volatility arbitrage, without researching company fundamentals, industry logic, or long-term value—they only profit from trading counterparties. When such funds dominate the market, it tends to slide into zero-sum games, with increased short-term speculation and weakened long-term pricing functions, which adversely affects the market ecosystem and displaces genuine value investors and industry research funds.”

“Quant strategies precisely penetrate human trading rhythms”

Not only has retail activity declined, but some investors have recently reported feeling at a loss in their daily trading as quant trading’s share continues to grow. They often find themselves in situations like feeling they should buy opportunities on the market, only for prices to crash immediately after, or being forced to stop-loss at points dictated by quant algorithms.

This week, veteran investor “Sand River” (a pseudonym), who admits he cannot compete with quant strategies, published widely circulated online articles such as “The Human Trader’s Guide to Quantitative Trading.”

Yesterday, he posted again, lamenting: “Yesterday’s surge in chemical stocks was wiped out today, and today’s tech rebound was immediately reversed.”

Some believe that ordinary retail investors cannot compete with millisecond order execution, precise market sentiment capture, and rapid price movements driven by algorithms, which severely impacts market fairness.

In the view of Li Chao (a pseudonym), a fund manager at a private firm in Shanghai, quant funds will seize all profitable opportunities—anything retail investors can think of, quant funds will anticipate and act on first, forcing retail investors to buy at higher prices. Quant strategies also make declines faster and more violent because computers are decisive in stop-loss execution, leaving retail investors no chance to cut losses.

Even some professionals interviewed have felt the impact firsthand. Shu Qiquan admitted that many investors find trading increasingly difficult, which is directly related to the surge in quant strategies. However, the problem isn’t that “quant strategies cause valuation errors,” but that they precisely penetrate human trading rhythms.

“Currently, in sectors like chemicals, gold, or geopolitical events, even when logic is clear and valuations are reasonable, prices are hammered down immediately upon entry; when investors can’t bear losses and try to stop-loss, prices often V-reverse. This isn’t due to misjudgment but because quant algorithms are precisely harvesting ‘human stop-loss orders.’ Quant funds don’t care about fundamentals; they only analyze micro-order book structures. When the market forms a consensus and retail stop-loss orders pile up, quant algorithms instantly break key support levels, triggering panic across the network, then low-cost accumulation and quick rebalancing occur. The moment you try to stop-loss is exactly when quant funds are building positions. So, it’s not a failure of valuation judgment but that your long-term logic is ignored in the face of short-term quant cycles. Quant dominates micro-price setting, turning the original T+1 ecosystem into a millisecond-level game.”

Regarding quant strategies’ influence on market “pricing power,” Li Chao also observed: “Quant funds will detect other institutions’ buying actions. For example, if I place an order to buy a stock, quant funds will buy in large quantities, forcing my purchase price higher; otherwise, I can’t buy at all. This is especially evident in small-cap stocks.”

Some industry insiders believe that the fundamental logic of quant strategies—profiting from market volatility—means that quant profits are essentially the losses of others.

“It’s like a limited amount of gold in a pit; the more quant funds scoop up, the less remains for retail investors and retail funds.”

In fact, the high volatility and unique liquidity advantages of the A-share market are precisely what attract some quant institutions. In late October last year, a founder of a domestic private quant fund with over 10 billion yuan admitted at an asset allocation forum: “The history of European and American financial markets is much longer than ours; looking at markets like the US or Hong Kong, many small stocks have almost no trading volume. The Chinese A-share market is unique—out of 5,000 stocks, all have trading volume, which provides a truly advantageous environment for quantitative trading.”

Subjective funds “surrender” and should proactively evolve

Regarding the recent popular theory of “vectorization surrender,” Li Chao believes that the continuous expansion of quant strategies will naturally influence other strategies, including subjective long-only funds. He said: “Currently, quant trading accounts for a significant share of the market, but it will grow even more. Because a profitable product will attract more investors. Ultimately, the ones that will beat quant funds are not other subjective long-only funds but quant funds themselves. Currently, the total scale of quant funds is about 3 trillion yuan; if it grows to 10 trillion in the future, the situation will change.”

He also predicts that subjective long-only funds are likely to continue shrinking because the overall market share is limited, and the growth of quant strategies will squeeze other approaches.

However, Shu Qiquan believes that surrender is futile; the key is to proactively adapt. His suggested strategies include:

1. Avoid crowded zones: Do not chase highs or bottom-fish during emotionally synchronized “hot moments,” leaving no profit space for quant funds.

2. Change trading habits: Reduce trading frequency, pay less attention to intraday fluctuations, and adopt medium- to long-term logic to counter short-term quant harvesting.

3. Recognize quant footprints: Learn to observe order book anomalies and understand the quant characteristics behind “hammering and V-reversals,” which can sometimes be opportunities rather than reasons to stop-loss.

“He emphasizes: ‘The market hasn’t changed; only the opponents have. In the era of quant, subjective trading is no longer about speed but about patience, logic, and understanding human nature.’ He states, ‘Quant advantages lie in speed, discipline, and breadth, but their blind spots are in logical depth, industry understanding, expectation judgment, and extreme emotion control. True subjective traders won’t write surrender letters but will proactively evolve: abandon high-frequency speed contests, shift to swing and logic-driven strategies; use quant behaviors in reverse; focus on sectors like new stocks, restructuring, and niche themes where quant coverage is weak; and seize opportunities driven by policy inflection points and industry trends rooted in human nature and logic.’”

He also notes that “fast and nimble” quant strategies are not invulnerable; in extreme situations, they can expose significant risks. The liquidity crisis in small-cap stocks caused by concentrated buy-ins in early 2024 remains a vivid memory. Recently, market figures like Dan Bin, chairman of Dongfang Harbor, have issued warnings about the risks of quant funds.

However, some industry insiders remain cautious about labeling quant strategies as purely negative. Shu Qiquan said: “I don’t think quant should be completely negated. It provides continuous liquidity and often absorbs sell-offs; it replaces emotion with discipline, objectively reducing irrational speculation. The real issues are scale, homogeneity of strategies, and lagging regulation and risk control. When everyone uses similar models and behaviors, especially during extreme market conditions, it can lead to synchronized withdrawals and sell-offs, intensifying systemic volatility. From a subjective trader’s perspective, my conclusion is clear: quant isn’t the enemy of the market, but its current scale and mode do distort price discovery and harm the long-term investment ecosystem. For healthy market development, it’s not about eliminating quant but about constraining high-frequency overcompetition, encouraging long-term holdings, and strengthening transparent regulation to restore a balance between value and trading.”

He further states that retail funds haven’t disappeared but have shifted from pure emotion-driven speculation to logic + main themes + leader stocks, resonating with quant strategies rather than opposing them. “In summary, the market isn’t a solo act of quant; it’s a coexistence of humans and machines, an upgraded ecosystem. The core of subjective trading isn’t about fighting quant but about leveraging strengths, avoiding weaknesses, and doing what machines can’t—deep research, emotional perception, and logical pricing. Subjective traders still have an irreplaceable space and profit advantage.”