HEAD-TO-HEAD: GAM vs JP Morgan

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The comparison of yearly returns of the two funds shows that since 2013, their relative performance flip-flopped with surprising regularity. GAM Star China Equity did better in 2013 and 2015, while JPM China did better in 2014 and 2016. The former outperformed the sector average in three out of the five years while the latter did it only once.

“In 2013 [GAM Star China Fund] did very well thanks to a large exposure to Macau gaming names,” said Share. “In 2014, however, China initiated its anti-corruption campaign and Macau casinos suffered. “The same exposure that helped [the manager] in 2013, hurt him in 2014.”

In 2015 Lai’s fund did very well mostly thanks to Chinese companies listed in the US via American Depositary Receipts (ADRs) – internet consumer companies like JD.com or Vipshop, according to Share.

While MSCI included China ADRs (American Depository Receipts) in their indices in 2016, only Alibaba rallied. Other ADRs did poorly on average, explained Share. “Again it was this ADR exposure that hurt [Lai],” she said.

By comparison, the volatility of returns of the JPM fund is lower. “Manager Howard Wang is more benchmark-conscious,” said Share. “He wouldn’t take too big of a bet when it’s away from the benchmark.”

His “secular growth” investment philosophy results in a bias toward healthcare and consumer discretionary sectors, since he sees in them long-term growth potential, Share explained. “This style factor contributed to his underperformance last year.”

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