Wang has 16 years of investment experience and has spent most of his career at Principal, along with a five-year stretch at Blackrock and Ping An China Asset Management.
“His relatively short track record here and on his previous funds make it difficult for us to assess his capabilities, and we would like to see him commit to a full business cycle,” Share noted.
She added that Wang’s team is comprised of ten analysts, with three tracking Chinese equities. Yet it is is relatively new. Most of the analysts have been with Principal for one to two years.
By comparison, Hudson managed the Schroder fund since 2008. He has been at Schroders for 23 years, ensuring his familiarity with the team and the company’s internal investment process, she said.
Hudson’s team is supported by 22 analysts who have responsibilities structured by countries and sectors. Twelve of the analysts are from the Greater China team. Share noted that most of the analysts have been with Schroder for over a decade.
“With an average experience of 16 years, we believe this to be one of the strongest teams in the region,” Share said.
Fees review
For the Principal fund, Share said that with a total expense ratio of 1.44%, the fund is 37 basis points cheaper than the Hong Kong equity median, giving it an edge over competing products.
In contrast, Hudson’s A-share class has a total expense ratio of 1.91%, making the Schroder vehicle 10 basis points more expensive than the median.
Share said that the Schroder fund’s relatively expensive fees is a “setback”, but she noted that Hudson’s high-conviction methodology coupled with the fund’s stellar track record is worth the premium.
Conclusion
Share said that in a hypothetical investment scenario, she would pick the Schroder fund over the Principal fund.
“The Schroder fund possess advantages across the five pillars (process, performance, people, parent and price) that outweight the disadvantages. We expect the fund to outperform its peers, hence warranting a silver rating [from Morningstar],” Share noted.
Share pointed out that the Principal fund has its own merits. While the fund is not likely to deliver standout returns, it is unlikely to significantly underperform.
