HEAD-TO-HEAD: China Universal Value Selected versus E Fund Kexiang

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Investment approach

E fund Kexiang’s investment process begins with identifying sectors that are either in a high-growth phase or long-term secular growth trend by assessing macro and policy, Qu said.

Portfolio manager Hao Chen seeks to invest in what he believes to be the future industry leaders with competitive edges, rapid earnings growth, and management with strong execution capabilities. Chen’s preference for higher growth opportunities has led to the portfolio’s persistent overweight in higher growth sectors such as information technology.

The portfolio also had a slight tilt towards mid-cap names compared with its peers which are often mega-cap and blue-chip focused. “Chen is not afraid to take big sector bets, so the portfolio often features higher sector concentration (about 30%),” she added.

China Universal Value Selected follows a bottom-up approach that focuses on identifying quality businesses with sustainable earnings and cash-flow growth, according to Qu.

Portfolio manager Jienan Lao favours companies with leading industry positions and sound management teams. In addition, the portfolio manager may occasionally invest in value stocks when he sees turnaround opportunities, but this only consists of a small portion of the portfolio (normally less than 20%).

In line with Lao’s quality and sustainable growth focus, the portfolio is more tilted towards mega-cap blue chip names, and the portfolio’s profitability metrics, such as return on equity have been higher than Chen’s and the CSI 300 index.

Compared with E Fund Kexiang, China Universal Value Selected is more diversified in terms of sector allocation with single sector weight capped at 20%, Qu concluded.

Fund characteristics

Sector allocation:

Source: Morningstar, 31 December 2021

Top 10 holdings:

Source: fund.eastmoney.com, 31 December 2021

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