A glance at China’s top performing funds authorised for sale in Hong Kong should enliven the debate about the merits of active versus passive approaches to fund management − at least when it comes to China equity funds.
Performance data from FE for 76 China equity funds with more than a three-year track record revealed five exchange-traded funds (ETFs) among the top 10 best performing China equity products in the market.
While the top two performers are active funds, the Allianz China A-Shares Fund and the Schroder China Equity Alpha, the next three were all ETFs.
Under these conditions, investors in passive products appear to have a strong argument: A 50/50 chance of choosing a top 10 fund while paying lower fees.
The three-year performance of the top 10 funds, net of fees, with the corresponding annual charges:
| Fund Name |
3-year return, net of fees (%) |
Annual Charge (%) |
| Allianz China A-Shares | 107.93 | 2.25 |
| Schroder China Equity Alpha | 105.93 | 2.00 |
| HS China A Industry Top Index ETF | 93.12 | 0.55 |
| Harvest MSCI China A 50 Index ETF | 81.22 | 0.60 |
| China CES China A80 Index ETF | 73.18 | 0.70 |
| BlackRock China A-Shares | 72.87 | 1.50 |
| HS China A Share Focus | 72.12 | 1.75 |
| BOCHK WISE SSE 50 China Tracker ETF | 66.17 | 0.89 |
| CSOP FTSE China A50 ETF | 65.14 | 0.99 |
| JPMorgan China Pioneer | 64.71 | 1.75 |
Data: FE, in US dollars, as of 28 June 2017.
As passive investments, ETFs charge lower management fees than active mutual funds. All five ETFs listed here have annual fees below 1%.
In terms of performance before fees are deducted, the Blackrock China A-Shares fund and the HS China A Share Focus would have returned 79.4% and 79.8% on a three-year basis, respectively, which would put them in the fourth and fifth spot in our ranking, above the China CES China A80 Index ETF.
Fees took the returns of these active funds down to 6th and 7th place.
The Allianz fund is not the most expensive on the market. That honour goes to Blackrock GF China, which charges a 2.75% annual fee and did not place in the top 10. Besides the Allianz and the Schroders funds, only three others (including another one from Allianz) have fees of 2% or higher.
