HEAD-TO-HEAD: Allianz versus Invesco

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Darius McDermott, Chelsea Financial Services

Introduction

The fluctuations of China’s equity markets have become a constant feature of the investment landscape, just as their gradual opening up to overseas investors is a source of potential returns.

Index inclusion has forced passive inflows and encouraged active managers with global mandates to raise their exposure at a time when the markets have been unsettled by the Sino-US trade dispute and a slowing Chinese economy.

The best performing segment this year has been A-shares, whose companies analysts have touted as relatively immune from external events. The CSI 300 index, a barometer of domestically-focused A-shares, has returned 34% year-to-date, according to FE Fundinfo data, outstripping the MSCI China index (up 22.%), which comprises foreign-listed large- and mid-cap China stock and which is vulnerable to overseas investors’ selling.

Yet, over five years the relative performances look different. The CSI 300 has cumulative return of only 17% , much lower than the MSCI China’s strong 48% return.

As the markets increasingly open up to international investors, dedicated China funds need to determine which segment – domestically-listed and consumer-focused, or foreign-listed and export-oriented – to concentrate their allocations

FSA asked Darius McDermott, managing director of Chelsea Financial Services. to compare two China equity products. He chose the quite recently incepted Allianz All China Equity Fund and the more established Invesco China Equity Fund.

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