HEAD-TO-HEAD: Fidelity vs Pinebridge

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Investment approach

The funds share a similar objective to achieve long-term capital growth from investing in the shares of companies listed in China, Hong Kong and Taiwan, or whose operations and assets are within Greater China.

Fidelity has more discretion to invest outside the region, but in practice it confines itself to the three territories. The main area of expertise of the fund manager, Raymond Ma, throughout his career has been China and especially the consumer sector.

“Ma’s investment approach is flexible, but he has a growth bias,” said Ng.

“In particular, he tries to identify companies that are undergoing structural changes that will generate growth in operations, revenues and earnings.”

Large-cap stocks tend to dominate the portfolio, but Ma typically has around 100 holdings, so diversification rather than concentration seems to be a key part of his approach.

For reference and clarity, Ma has developed an “ABCDE” framework for classifying factors that could promote the type of structural changes he is looking for.

These are: Automation; Big data; Cloud; Domestic consumption; and Electric vehicle.

“Ma believes that companies which adopt these technological developments are, by definition, going through structural changes and if used appropriately they will promote growth,” said Ng.

“For instance, automation should enhance transport and logistic companies’ performance by reducing costs, and big data can improve retail firms’ sales by helping them detect shifting consumer trends.”

In contrast, the Pinebridge fund’s investment approach is far less individualistic.

“The asset manager has a centralised process that is deployed throughout the firm worldwide and within which the fund managers must operate,” said Ng.

The framework is called the “growth capitalisation research” model, according to Ng.

There isn’t a bias to any particular style (neither growth nor value). Instead, analysts categorise companies according to their position in the four-stage business cycle (launch, growth, maturity and decline), and determine whether they have the potential to transform to a growth stage (or, if already there, attain “extra growth”) through entering a new market or tapping a different region.

Companies (and therefore stocks) are further classified as: exceptional growth; high growth; stable growth; and mature (with either defensive or cyclical growth).

“Pinebridge reckons markets are inefficient and they fail to understand when companies are moving back and forth within their conventional business cycle,” said Ng.

The Pinebridge Greater China Equity Fund holds around 70 stocks, so it is well diversified. Holding periods tend to be long and hence turnover is low, Ng added.

Source: FE Analytics; Morningstar

*20 May 2016 – 22 May 2019

Market Exposure:

Sector Weightings

Source: FE Analytics

*30 April 2019, **31 March 2019

Top 5 holdings

Source: FE Analytics

*30 April 2019, **31 March 2019

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