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Blackrock’s China equities head departs

Morningstar ends coverage of the flagship BGF China fund following Helen Zhu's exit, citing concerns about investment process and a lack of confidence in the management of the fund.
Helen Zhu

After five years of service with the firm, Helen Zhu, co-portfolio manager for the BGF China Fund, the BGF China Flexible Equity Fund, as well as the BGF China A-Shares Fund, has decided to leave Blackrock to pursue other interests,” a firm spokeswoman told FSA.

On the flagship $1.3bn BGF China Fund, Zhu was supported by co-manager Lucy Liu, who will now act as sole portfolio manager for the fund in the interim.

For the $384m BGF China A-Shares Fund, lead portfolio manager Matt Colvin will act as sole portfolio manager.

Colvin will also have additional duty as co-manager alongside Lucy Liu on the third product, the $19m BGF China Flexible Equity Fund, which was launched in 2017, the spokeswoman added.

Zhu’s departure was actually announced three weeks ago on 15 July, according to Morningstar.

The fund research firm has retained its previous neutral analyst rating for the flagship BGF China Fund, but pointed out that although interim manager Liu has 15 years experience covering Chinese equities, she “has had limited portfolio management experience prior to this role”.

Morningstar has decided to end its qualitative research coverage of the BGF China Fund from 6 September because of the increasing unpopularity of the asset class among investors in general and a lack of confidence in the fund in particular.

“We’ve decided to concentrate our resources on asset classes where there is more demand,” Germaine Share, manager research analyst for Morningstar Asia, told FSA.

“In addition, we have always had concerns about the investment process at the Blackrock fund which tends to reflect the flexible style approach adopted by Andrew Swan, who heads the firm’s Asia equities team. Switching between value and growth styles is perhaps less appropriate for the smaller universe of China stocks and has led to lumpy performance,” she said.

Share also pointed out that Zhu had a sell-side background before joining Blackrock, while the appointment of Liu to manage the fund is “unlikely to be a positive catalyst”.

Morningstar will now only cover China funds with gold, silver or bronze analyst ratings.

The BGF China has a three-star rating (the maximum is five stars) from Morningstar and a neutral analyst rating.

Its three-year cumulative return has underperformed the average return of 107 funds in its sector (for funds authorised for sale in Hong Kong and/or Singapore) by 7.6 percentage points, and by 3.4 percentage points since 1 August 2014 when Zhu took over the fund’s management, according to FE data.

However, the fund’s annualised performance over discrete six month periods has been more successful, although volatile – 19.20% compared with 17.36% for the sector average.

“Over a fairly lengthy track record, the manager has, period-by-period, over- and under-performed [her peers] roughly equally,” noted FE, adding that relative performance tends to be better in falling markets.

3-year cumulative return

Annual return Annual volatility Alpha Sharpe ratio


Blackrock GF China Fund


3.58% 19.20% -2.28 0.00


Sector average


6.96% 17.36% 0.00 0.14


Source: FE Analytics. Data in US dollars, 5 August 2016 – 7 August 2019. (*median OCF)

Before joining Blackrock, Zhu was managing director and chief China equity strategist at Goldman Sachs research division from 2008. She began her career in investment banking at Donaldson Lufkin & Jenrette, having previously covered Asian telecom companies at RBS Research.

Liu, the flagship fund’s new interim manager, has expertise mainly in North Asian communication services, consumer discretionary and staples, and telecoms sectors, according to Morningstar. At Blackrock, she is supported by the 40-member global emerging markets fundamental equities team led by Swan, the research firm noted.

According to the Blackrock spokeswoman, “there isn’t going to be any change to the investment objective of the [three China] funds.”

Nevertheless, “a search is underway for a [manager] to work alongside [Liu and Colvin] in managing our suite of China fundamental active equity solutions”, she added.

Blackrock GF China Fund versus sector average

Source: FE Analytics. Three-year cumulative returns in US dollars.

Part of the Mark Allen Group.