Gam manager loads up on China

Asset Class in Focus

The new portfolio manager has recently moved from under- to overweight China equities, citing “compelling value”.

Since May, Robert Mumford, Hong Kong-based portfolio manager for emerging market equities at Gam Investments, has been adding more Chinese equities to his Asia-focused strategy.

The Gam Star Asia Equities Fund, which is only available to professional investors in Hong Kong and Singapore, has 51% of its assets in Chinese equities, which compares to the 41.5% allocation of its benchmark index, the MSCI AC Far East ex Japan index, according to the fund factsheet.

“We have moved back to the December-type levels where there is compelling value in the asset class,” he told FSA in a recent interview.

“Valuations of stocks, especially for those in the industrials and renewables space, have fallen into interesting levels. But their earnings prove quite resilient and are expected to be upgraded because of some China policy support.”

This is not the first time that Mumford made shifts in his portfolio. At the start of the year, he added Chinese equities to the fund, which made it overweight the asset class. However, in April, he underweighted China because he found the asset class becoming more expensive and shifted to India, which he believed was more attractive at the time.

“Now we are neutral in India from overweight, as well as Asean overall,” he said.

The Gam Star Asian Equity Fund

Source: Fund factsheet. As of the end of July.

Asset allocation decisions are largely based on valuations, he explained. He noted that although he is valuation-conscious, it does not mean that he favours value stocks over growth stocks.

“We stress valuations, but we are style-agnostic and tilt in different directions depending on our valuation targets for different stocks.”

For example, Tencent, which is usually categorised as a growth stock, is the fund’s top holding in the portfolio at 8.7%. Mumford said that the company’s valuation has gone down recently, but he still expects further earnings upgrades.

A successor 

Mumford joined Gam in January and took over the Star Equities Fund and the Star China Equities Fund from Michael Lai, who left the firm in March, according to information from Morningstar Direct. Like the Asia-focused fund, the China product is only available to professional investors.

Since the start of the year, both funds have outperformed their benchmarks and sectors in Singapore, according to FE Analytics. Previously, the products underperformed their benchmarks several times on a yearly calendar basis. 

Discreet annual calendar performance (%)

YTD 2019

20182017201620152014

2013

GAM Star Asian Equity

13.01

-24.2835.8-1.43-5.93-5.89

11.59

Index : MSCI AC Far East ex Japan

4.79

-13.436.657.04-5.726.1

6.06

Sector : Sgp Mt Equity Asia Pacific ex Japan

7.37

-13.4525.25.25-2.438.68

6.15

GAM Star China Equity

18.36

-28.7146.11-11.093.61-5.38

26.51

Index : MSCI China

6.57

-18.5855.311.16-7.688.28

4

Sector : Sgp Mt Equity Greater China

12.81

-18.0834.93-0.761.49.73

14.09

Source: FE Analytics

It is not clear, however, whether this year’s investment decisions were solely made by Mumford.

“Mumford has been working with Lai in transitioning the portfolio, but it is too soon to observe any sort of meaningful changes,” Germaine Share, Hong Kong-based associate director for manager research at Morningstar, said in a report detailing Mumford taking over the China fund.

Mumford said that both the Asia and China funds will have a “slightly different” strategy, noting that they will remain style-agnostic.

“But we will be integrating cross-asset inputs from our macro teams, as well as inputs from the overall emerging markets team, [which previously was not involved in managing the Asia and China strategies],” he said.

“The input will be wider, and Asia and China become more internationalised, rather than just looking at them as individual regions or markets.”

The methodology of including cross-asset inputs and leveraging on a larger emerging markets team has already been in place in the firm’s global emerging markets strategy, he noted.

“Basically, we are going to replicate that methodology for the China and Asia funds.”

Another change is that Mumford plans to have a more-benchmark aware strategy, Share said in the report.

“The greater benchmark-awareness means that volatility should come down compared with when Lai was at the helm,” she said.

“[But] given that he plans to maintain the strategy’s thematic and style-agnostic approach, its performance pattern will likely remain rather unpredictable and susceptible to sector-specific risks.”


The Gam Star Asia Equity Fund versus its benchmark and sector

Source: FE Analytics. In US dollars. Note: the strategy is only available to professional investors in Hong Kong and Singapore.

The Gam Star China Equity Fund versus its benchmark and sector

Source: FE Analytics. In US dollars. Note: the strategy is only available to professional investors in Hong Kong and Singapore.

 

 

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