HEAD-TO-HEAD: Aegon Industrial versus E Fund

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INVESTMENT PROCESS

Both the Aegon Industrial and E Fund offerings are aggressive mixed-asset products, where they are mandated to invest at least 60% of their assets in equities, according to Liang.

However, like other aggressive mixed-asset products in the mainland, both funds usually have an equity exposure of around 80%.

“It is very typical for aggressive allocation funds. But during extreme market conditions, like in 2018, we do observe that they would lower their equity exposure to around 60-70%,” Liang explained.

The Aegon Industrial and E Fund products both are growth-oriented products. They also pay attention to the quality aspects of a company, including its management and competitive advantages. However, they are different in terms of their investment process.

For example, the Aegon Industrial fund is more valuation conscious than the E Fund product.

“The Aegon Industrial fund’s manager makes sure he does not overpay for growth and avoid some hot stocks if he can’t justify their high valuations with earnings growth,” Liang said.

“On the other hand, the E Fund product is a more growth-oriented product and also has a bias toward smaller companies,” she said.

Mid-cap companies account for nearly 40% of the E Fund portfolio, which compares to just around 15% for the Aegon Industrial fund, according to data from Morningstar.

Source: Morningstar. As of end-June

In addition, while both offerings are benchmark agnostic, the E Fund offering tends to take larger sector bets, according to Liang. For example, as of the end of June, the technology sector accounted for around 40% of its portfolio.

Meanwhile, the Aegon Industrial fund’s manager would typically limit the sector exposure to 25% of the portfolio.

“For example, he has huge exposure to healthcare, and because of capital appreciation, the sector accounted for 30% of the portfolio in June. So we expect that he will be trimming that position,” she said.

Sector allocation

Source: Morningstar. As of end-June 2020.

The Aegon Industrial fund is also more concentrated than the E Fund offering, Liang added. The Aegon Industrial product holds around 40-60 stocks, while the E Fund offering will have 70-100 names.

Top 10 holdings

Source: Morningstar. As of end-June 2020.

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