HEAD-TO-HEAD: Invesco versus Schroders

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Investment process

The Invesco and Schroders funds belong to Morningstar’s Greater China category, which are products that invest in Chinese offshore stocks.

Both funds seem remarkably similar in performance and investment process, according to Share.

“Both of them have a bigger focus on management quality [than most peer funds] and they tend to steer away from state-owned enterprises.”

How are they differentiated? Share said the Invesco fund has more leeway to stray from the benchmark index, while the Schroders fund is more of a core portfolio holding, which means it is more benchmark-aware.

The benchmark for both funds is the MSCI Gold Dragon Index.

“If you look at the active share and the tracking error, the Invesco fund will be higher than the Schroders fund.”

When compared to the benchmark, the five-year tracking error for the Invesco fund is 5.09 and for the Schroders fund it is 3.24, according to Share.

The differing benchmark strategies are reflected in how much each fund has allocated to mid- and large-cap stocks.

“Given that the Schroders fund is more benchmark-aware, it does not have much invested in small-to-mid-cap stocks compared to Invesco,” Share said.

Market cap allocation (%)

Source: Morningstar

Differences can also be seen with sector allocation. In most sectors, the Invesco fund deviates from the index more than the Schroders fund.

Sector allocation (%)

Source: Fund factsheets

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