Manager review
The portfolio manager of the Bosera fund is HE Kai, who is based in the firm’s Hong Kong office. On the fixed income team there are 28 investment professionals with portfolio management and research responsibilities, Ng said.
ChinaAMC did not provide information about the fund manager.
Fees
The annual management fees and ongoing charges (OCF) of Bosera (Class A) are 1% and 1.56%, respectively.
For ChinaAMC (Class A), management fees are 1.25% and OCF is 1.55% to 1.6%, depending on different currency units.
Ng said the costs of the funds are generally in-line with peers.
Conclusion
“While credit ratings of the underlying instruments of the two funds are high (AAA or AA), investors should be aware that they are rated by local rating agencies, which are generally considered inconsistent versus the international ones,” Ng said.
“Studies show that over 90% of onshore bonds are rated AA or above by local agencies. Therefore a bond rated AA by local agencies could present higher risk than that rated by international ones with the same rating.
“The relatively short bond market history in China increases the difficulty for investors when trying to understand the inherent risk of onshore bonds, as limited default history is available for study.”
Against the backdrop of China’s economic slowdown, it is sensible to stay focused on higher quality bonds as well as staying low in duration, Ng said.
“While Bosera and ChinaAMC may have responded with different approaches, they should both continue to perform well relative to the peer group average under the current conditions.”
Among the two funds, Bosera’s exposure to government bonds should serve as an additional cushion to smooth the impact of a rise in credit risk and further loosening of the monetary policy by the People’s Bank of China, Ng added.
