Everything You Need to Know About 03441, the ETF That Outperformed QQQ This Year I recently started paying attention to an interesting ETF, CSOP's 03441. Over the past two years, one of the most important investment logics in the US stock market has been the growth expectations brought by AI. However, I believe this logic is changing. As the AI industry gradually enters the commercialization verification stage, corporate revenue growth rates are beginning to diverge, while the capital expenditures of tech giants like Microsoft, Meta, and Google remain at very high levels. When revenue growth cannot continue to accelerate, but capital expenditures remain high, the market will naturally shift its focus from growth to the quality of growth. This means that in the future, investors may no longer be willing to pay high valuations solely for revenue and EPS growth, but will pay more attention to how much free cash flow a company can actually generate. Based on this judgment, I believe that the free cash flow factor stock selection method used by 03441 is a very advanced investment approach that aligns with current market changes. Let me explain in detail below. 1. What exactly is 03441? 03441, officially known as the CSOP FTSE East & West Equity Select ETF, was listed on the Hong Kong Stock Exchange on March 31, 2025. It tracks the FTSE ETF Connect East & West Heritage Equity Select Index. Currently, the core structure of the index is: 60%: High-dividend Hong Kong stocks, approximately 23 companies 40%: US free cash flow strategy, approximately 100 companies The logic behind the two asset portions is different. The Hong Kong stock portion primarily seeks mature companies with relatively outstanding dividend returns, while the US stock portion selects companies from large US companies with strong cash generation capabilities that meet quality and risk standards. It is not simply a Hong Kong stock dividend ETF, nor is it just a Nasdaq 100 ETF with a different name. I prefer to understand it as a cross-market cash flow allocation strategy. 2. Which stocks does it actually hold? Let's look at the Hong Kong stock portion first. Major holdings include: CLP Holdings, Power Assets Holdings, Hong Kong and China Gas, Bank of China (Hong Kong), SITC International, MTR Corporation, etc. These companies cover sectors such as utilities, finance, and transportation. Many have relatively mature business models and can distribute cash to shareholders through dividends. The 40% of US stocks follows a completely different logic. As of October 26, 2026, representative holdings include: MSFT (Microsoft) AAPL (Apple) META (Meta) AVGO (Broadcom) GOOGL / GOOG Alphabet BRK.B (Berkshire Hathaway) LLY (Eliley) It's clear that tech stocks still occupy a significant position. However, there's a crucial difference: 03441 doesn't directly purchase the seven largest tech companies by market capitalization. Instead, it uses the free cash flow factor to screen large US companies. This means it won't necessarily include a company in its portfolio simply because it has high AI hype. 3. Why do I believe the free cash flow factor is a very advanced stock selection method? Let me first explain free cash flow. FCF = Operating Cash Flow - Capital Expenditures (Capex) Suppose a company generates $10 billion in operating cash flow annually, but invests $8 billion in capital expenditures to expand its business, its remaining free cash flow is only $2 billion. This is different from the growth shown on the income statement. Especially in today's AI industry. In the past few years, the market has valued AI companies primarily based on revenue growth, market potential, and future profit projections. As long as growth is fast enough, the market is willing to pay even high valuations. However, this valuation logic faces challenges when revenue growth slows down at the margin, and capital expenditures fail to decline in tandem. For example, Meta's revenue still grew by 26% year-over-year in the third quarter of 2026, but its free cash flow for the quarter turned negative at $2.12 billion. This doesn't mean Meta's AI investments are worthless, but rather that even if a company's revenue growth is very strong, it doesn't necessarily mean its free cash flow will grow at the same rate. I believe the market will increasingly focus on three questions in the future: Is the rate of corporate revenue growth sufficient to cover ever-expanding capital expenditures? Can the substantial investments in AI infrastructure ultimately translate into real cash returns? When industry growth slows, which companies will still possess the ability to consistently generate free cash flow? The 03441 US stock free cash flow strategy provides a quantitative stock selection framework to address these questions. Specifically, it uses the Russell 1000 Free Cash Flow Focus Index, which first screens companies based on quality, risk, and cash flow. Then, it ranks companies based on the absolute amount of their free cash flow over the past 12 months, selecting approximately 100 companies. Finally, it allocates weights according to market capitalization and sets a weight cap for each company. It doesn't simply buy the 100 stocks with the highest free cash flow yield. I particularly appreciate this approach because: It doesn't rely entirely on subjective predictions of future growth but attempts to screen companies with genuine cash-generating capabilities based on their existing cash flow. Moreover, the index is adjusted regularly. As a company's operating conditions change, its cash flow performance will also affect whether it meets the stock selection criteria in the future. Of course, this is a rule-based screening method based on historical financial data, and it cannot predict all industry turning points in advance, nor can it guarantee future returns. However, as the AI industry gradually shifts from telling growth stories to validating investment returns, I believe this stock selection method has strong practical significance. 4. A detail many people are unaware of: The strategy of 03441 has changed. This is very noteworthy. When 03441 was first launched, the US stock portion actually adopted an equal-weighted strategy for the seven major US stock indices. On September 22, 2025, the index officially switched this portion to the Russell 1000 Free Cash Flow Focus Index. On September 21, 2026, the target allocation for Hong Kong stocks and US stocks was adjusted from the original 65%/35% to 60%/40%. In other words, this is not an ETF that has maintained the same investment strategy since its listing. In my opinion, both of these adjustments are worth studying. The first change altered the stock selection logic for the US stock portion. The second change increased the allocation ratio of US free cash flow assets. From directly allocating to the seven major US stocks to introducing a more systematic cash flow factor screening, I believe this represents a significant change in product strategy. Especially as the market gradually shifts its focus from growth to corporate capital efficiency. However, increasing the weighting of US stocks also means the portfolio will still be affected by the valuation of US tech stocks and market volatility. 5. How has 03441 performed historically? See the chart directly. What we should really study is its drawdowns, volatility, and correlation with the Nasdaq 100 and the traditional Hong Kong high-dividend index in different market environments. Cross-market allocation can diversify some risk, but it doesn't mean that Hong Kong stocks and US stocks won't fall simultaneously. Note: This is also a Southbound ETF eligible for trading, so mainland investors can also find this overseas asset without quota restrictions through the Hong Kong Stock Connect channel. ———————————————— Finally, let me share my thoughts. I've always felt that a major characteristic of the US stock market in recent years is that investors are willing to pay very high valuations for very distant growth expectations. Especially AI. However, this valuation logic isn't always effective. As the AI industry transitions from a high-growth phase to commercialization and investment return validation, once revenue growth slows, the market will begin to re-evaluate companies' capital expenditures, operating cash flow, and actual earnings quality. In the past, the market focused on how much revenue AI could generate; in the future, it may focus more on how much cash AI can ultimately leave for shareholders. This is why I believe 03441's free cash flow factor stock selection approach is very advanced. It doesn't attempt to profit by predicting the next technological hotspot, but rather uses cash generation capability as the core criterion for stock selection. Combined with high-dividend assets in Hong Kong stocks, it forms an allocation method that simultaneously considers shareholder cash returns and corporate growth capabilities. I believe this stock selection framework is worth studying in a future market environment that may place greater emphasis on capital efficiency, cash flow, and shareholder returns. I'm paying attention to 03441 not because of its current price increase, but because I believe the market is changing. Investing shouldn't only focus on how much money a company can earn in the future, but also on how much of that money ultimately belongs to shareholders. @CSOPAsset_ETF