HEAD-TO-HEAD: Columbia Threadneedle vs Invesco

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Investment strategy

 The Invesco and Threadneedle funds take the MSCI AC Asia Pacific (ex-Japan) Index as the benchmark, but both products have no exposure to the Australian market.

Comparatively, the Invesco team is more benchmark agnostic than the Threadneedle managers.

“The Invesco team favours industry leaders with a good management track record and the clear capability to gain larger market share. The portfolio selects stocks on a fair value basis,” Ng said.

The fund therefore has a bias toward non-state-owned companies.

“In the benchmark, financials are mostly the state-controlled financial institutions in China,” Ng said. “Therefore, the portfolio has a large underweight in the financial sector.”

According to the Invesco fund factsheet, at the end of July, financials represented the biggest underweight in the fund, which holds 6.4% of assets in the financial sector versus the benchmark’s 23%.

China’s two biggest state banks in terms of market capitalisation, Industrial and Commercial Bank of China and China Construction Bank, are among the top underweight positions in the fund.

India’s financial sector dominates the fund’s financial holdings, Ng noted.

Typically, bank and financial institutions are mega-cap companies. Because of a small exposure to the sector, the fund is relatively small and mid-cap focused, he added.

Turning to the Threadneedle fund, the manager also uses a bottom-up style of stock picking and aims to maintain a highly concentrated portfolio of 25-35 stocks.

Ng said the Threadneedle portfolio is comprised of two major parts.

“The team builds 50-70% of the portfolio with companies in an industry that has secular growth prospects.

“These companies should prove that they have an innovative business model, a strong financial track record and the ability to expand market share,” said Ng, adding that the overweight position of this group of companies can go up to 6% over the benchmark allocation.

“The remaining 30-50% is taken up by companies in cyclical industries, such as material and industrial companies. The team looks for competitive market leaders.”

At the end of June, the fund held large overweight positions in information technology, financials and consumer discretionary.

In terms of geographic allocation, the fund is close to the benchmark with only small deviations. The biggest discrepancy is India, with the fund holding 3.1% and 9.7% in the benchmark.

Ng said that the Threadneedle fund has a high conviction and concentrated portfolio that is currently positioned closer to the benchmark than the Invesco fund.

Top allocation

Source: Fund factsheets. Both funds use the MSCI AC Asia Pacific (ex-Japan) as the benchmark. *The Threadneedle fund’s latest factsheet is dated the end of June.

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