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Are expensive Greater China funds worth the extra cost?

Greater China-focused funds that have higher fees tend to underperform their benchmarks more often than those with lower fees, according to FE data.
Rolled up Chinese Yuan Note (Renminbi) isolated on white

FSA took a quick look at SFC-registered actively-managed Greater China funds, comparing their cost (OCF) against outperformance, measured by the three-year alpha.

Out of the 45 funds, 14 products have OCF above the median of 2.01%, while 31 of them are below the median.

There appears to be a rough correlation between high fees and low alpha. A larger percentage of the funds with above-median OCF had three-year alpha lower than 2.27, the median for the category, the data show. Only 35% of them have alpha higher than the median.

On the flip-side, 54% of the less expensive funds had alpha higher than 2.27.

Greater China funds

Alpha above median Alpha below median Total
OCF above median

5

9

14

OCF below median

17

14

31

Source: FE Analytics. All fund NAVs were converted to US dollars for comparative purposes.

The data also show that 14 out of the 21 funds that have OCF below 2%, had alpha higher than 2.27.

In addition, two funds with the highest OCF had negative alpha, while four funds with the lowest OCF had alpha greater than 3.

Top five funds with highest OCF

Fund

OCF

Three-year cumulative alpha

Three-year cumulative return

Hamon Greater China in US

4.51

-2.52

4.96

GF China Growth in US

3.77

-6.91

-1.26

AB FCP I China Opportunity Portfolio TR in US

3.43

0.33

7.23

Value Partners China Convergence in US

3.16

2.5

9.68

Manulife Greater China Opportunities TR in US

2.66

3.58

10.22

 

Top five funds with lowest OCF

Fund

OCF

Three-year cumulative alpha

Three-year cumulative return

JPMorgan Provident Greater China in US

1.04

3.47

9.77

JPMorgan SAR Greater China in US

1.14

4.1

10.49

Value Partners Classic in US

1.58

5.4

12.56

First State Greater China Growth TR in US

1.6

5.87

11.58

GAM Star China Equity in US

1.63

-0.26

7.32

Source: FE Analytics, performance in US dollars, as of 31 October 2017.

Part of the Mark Allen Group.