HEAD-TO-HEAD: Allianz versus Invesco

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Investment approach

“Stock selection is key for Chinese equity funds,” said McDermott.

Launched in December 2017, the Allianz All China Equity fund has a similar allocation to the MSCI All China Index (close to 60% China A-shares and 40% offshore), which the fund managers argue produce “a more balanced representation of growth opportunities in China,” said McDermott.

Nevertheless, “around half of the portfolio is invested in Chinese A-shares, including many of its top 10 holdings, which is a reflection of its focus on domestic-driven growth as China moves from an export-led to a domestic consumption economy,” according to McDermott.

The Allianz fund has less of a track record than the Invesco fund to analyse, but the fund “appears to have a strong momentum focus, meaning it should rise in tandem with markets,” he said.

“But, the fund has shown itself to suffer if markets underperform, as was the case in 2018,” he added.

The Hong Kong-based managers of the Invesco China Equity Fund are supported by a team of 20 analysts across the region to help identify the best companies across the domestic Chinese A-share market, Hong Kong listed H-shares, as well as US-listed American Depositary Receipts, according to McDermott.

“The Invesco fund has a valuation discipline, with the managers often taking a contrarian approach. They will sometimes act before consensus on a stock is reached, looking for under-researched ideas,” said McDermott.

“This means the fund will likely have a value-, rather than a growth-style bias.”

He pointed out that the fund can invest in companies of any size, but because “the managers are very selective about state-owned companies and generally dislike the banks, the fund tends to be underweight large-cap companies and has a tilt towards medium-sized firms”.

“This value nature should see the fund outperform when the style is in vogue, but also defend well in down markets,” said McDermott.

Source: FE Fundinfo; Morningstar

(5 December 2017 – 19 December 2019 in US dollars)

Benchmarks: *MSCI All China Index; **MSCI China 10/40 Index

Market Exposure:

Top five equity sector weightings (31 October 2019)

Source: Fund factsheets

Top 5 equity holdings (31 October 2019)

Source: Fund factsheets

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