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Which funds had the best ratios in 2017?

China equity funds have delivered, on average, the most bang for the buck in 2017, when measured in terms of alpha and risk-adjusted returns or the Sharpe ratio.
Which funds had the best ratios in 2017?

Alpha measures the fund’s outperformance with respect to the underlying benchmark. “Delivering alpha” is the paramount duty of an active fund manager.

FSA analysed the ratios of mutual funds authorised for sale to investors in Hong Kong, using data from FE. We excluded funds without stated benchmarks and total-return funds that use floating rates of return, such as Libor, as their benchmarks. We analysed the returns and ratios in US dollars.

According to this measure, in 2017, managers of many Chinese equities delivered on their promise, as eight out of ten funds with the highest alpha are in that category.

Funds with highest alpha in 2017

Fund Benchmark 1-year Alpha 1-year Return
ChinaAMC China Opportunities MSCI China A Total Return 47.28 55.86%
Matthews Asia China Dividend MSCI China 44.4 37.34%
First State New Era PRC MSCI China 43.85 47.21%
First State China Growth MSCI China 43.55 55.74%
Matthews Asia China Small Companies MSCI China Small Cap 38.93 55.73%
Investec All China Equity MSCI All China 35.59 69.01%
Invesco China Opportunity III MSCI China A 34.31 46.23%
Value Partners China Convergence MSCI China 30.07 41.25%
First State Japan Equity MSCI Japan 29.94 42.86%
JGF – Jupiter Global Financials MSCI ACWI Financials 29.32 30.87%
Data: FE, 31 December 2017, in US dollars. Funds presented are from the Hong Kong SFC-registered universe. Alpha  represents outperformance of the fund vs its respective benchmark

Sharpe ratio measures an investment’s return in relation to its volatility, or risk. Funds with the highest Sharpe ratio deliver most return for a given level of risk.

Among funds authorised for sale to investors in Hong Kong, China funds dominated the list of funds with the highest Sharpe ratios in 2017, with returns measured in US dollars.

The Fidelity China Consumer Fund has managed to deliver the highest return for a unit of volatility. The second fund in the ranking, the JPM China Fund delivered a higher return, but at the cost of higher volatility, which resulted in a lower Sharpe ratio.

Funds with highest Sharpe ratios in 2017

Fund Category Sharpe Ratio 1-year Return
Fidelity China Consumer Greater China Equity 10.21 52.91%
JPM China China Equity 9.43 59.11%
Baring Asia Growth Asia Pacific ex-Japan Equity 9.36 57.84%
JPM Greater China Greater China Equity 9.19 55.75%
Matthews Asia China Dividend China Equity 9.19 37.34%
First State China Growth China Equity 9.16 55.74%
Zeal Voyage China China Equity 9.15 41.64%
UBS (Lux) Equity Greater China Greater China Equity 8.84 54.34%
UBS(Lux) Equity China Opportunity China Equity 8.80 59.37%
HSBC GIF China Consumer Opportunities Consumer Goods and Services 8.66 32.76%
Data: FE, 31 December 2017, in US dollars. Funds presented are from the Hong Kong SFC-registered universe.

Part of the Mark Allen Group.