HEAD-TO-HEAD: First State versus Schroders

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Investment approach

Both the First State and Schroders products invest in Hong Kong-listed stocks, according to Share, noting that these can either be companies incorporated in Hong Kong or in the mainland.

At a glance, the products are similar as both have a preference for quality growth companies, Share said. In addition, each fund has around 40 names in the portfolio, and both of their top 10 holdings represent around 46% of assets.

Top 10 holdings

Source: Fund factsheets

However, a key difference is that one fund is benchmark-aware while the other is agnostic, according to Share.

The First State fund, which cites the MSCI Hong Kong Index as its benchmark, is benchmark agnostic.

“The First State fund’s mandate does not have any guidelines when it comes to paying attention to its benchmark,” Share added.

For example, Vitasoy International, which is in the top 10 holdings, accounts for 3% of the portfolio. While the company is a constituent on the MSCI Index, its weighting is only 0.59%.

“The company has been one of the top holdings and a long-time favourite of the fund manager,” Share said.

Turning to the Schroders fund, Share said that the product has weighting guidelines on the individual stock and sector level relative to its benchmark index, the FTSE Hong Kong Index. The maximum or minimum weighting on the stock level is 7% relative the index and on the sector level it is plus or minus 15%, according to Share.

“While this is not a very tight guideline, it does tell you that the fund managers would have to pay attention to the benchmark.”

Because of the benchmark awareness, the portfolio will include “traditional staple blue-chip Hong Kong stock names”, such as property companies Sun Hung Kai and Swire.

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