Over the past three years, Chinese equity funds category delivered an average return of 24.8%, measured in US dollars, according to FE. The range of returns was quite broad, from the stellar gain of 91% of the UBS (Lux) Equity China Opportunity fund to the loss of 6.7% by the CCB International China Policy Driven Fund.
Obviously funds followed a range of different approaches and strategies, which resulted in such diverse outcomes. But which funds differed most from their peers?
FSA took a look at correlations of returns of China and Greater China equity funds over the past three years, as calculated by FE, and found five funds that stood out for low average correlations with other funds.
| Fund | Average correlation | 3-yr return | 1-yr return |
| HS China B-share Focus | 0.653 | 49.62% | 13.54% |
| CSOP MSCI T50 ETF | 0.723 | 42.41% | 38.82% |
| Invesco China Opportunity III | 0.776 | 21.71% | 40.28% |
| Schroder China Equity Alpha | 0.777 | 68.01% | 39.48% |
| CCB International China Policy Driven | 0.799 | -6.68% | 3.95% |
| MSCI China Index | 47.14% | 46.29% |
Data: FE, returns in US dollars, as of 7 March 2018.
The Hang Seng China B-share Focus fund, invests in foreign currency (US dollar and Hong Kong dollar) shares listed on the Shanghai and Shenzhen stock exchanges. It’s a highly-concentrated fund, with the top 10 holdings accounting for 79% of its assets. Around 68% of them are in consumer products and services.
The CSOP MSCI T50 ETF is only in part Chinese, as it tracks the performance of the largest 50 internet software, services and retail companies in China and the US. Its holdings include Baidu, C-Trip, Alibaba, JD.com and Tencent, but also Alphabet, Ebay, Amazon, Facebook, Groupon and Yelp.
The Schroder China Equity Alpha Fund was the most successful fund in the past three- and one-year periods. Domiciled in Hong Kong, with $263m in assets, it stands out for its relatively low correlation to most other China equity funds.
The CCB International China Policy Driven Fund had a dubious distinction of appearing in FSA‘s earlier rankings of worst-performing China equity funds. While its returns are relatively uncorrelated with other funds’, its performance shows that predicting the effect of China’s policies on business is difficult.
