HEAD-TO-HEAD: Invesco vs JP Morgan

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Investment approach

Both funds invest in the Greater China equity markets and employ a bottom-up selection process. However, the funds have different criteria and also focus.

The Invesco fund is more valuation conscious, Ng said. The manager has a framework to identify the fair value of a particular stock and buy into it when its price is below this value.

“The fund’s managers will sell or trim the position if they suddenly become overpriced,” he explained.

Ng noted that although the product is valuation conscious, it also pays attention to quality, or companies with more sustainable business models; this explains why the fund prefers companies in the private sector.

“When compared with state-owned enterprises (SOEs), the managers believe that the way their businesses are managed is much better in the private sector,” he added.

Turning to the JP Morgan fund, Ng said the product prefers growth companies, with a strong focus on quality.

“The managers of [this] fund are willing to pay a higher valuation to get better growth,” he said, noting that long-term earnings growth is a key driver for stock selection.

The differences in the products’ investment approach are reflected in the differences in security selection.

For example, because of Invesco’s bias towards the private sector, it has more exposure to mid- and small-cap companies when compared with the JP Morgan fund, which is tilted more towards large- and giant-cap companies, according to Ng.

Source: Morningstar

The style differences are also reflected in their country allocation.

Source: Fund factsheets

Ng explained that the Invesco fund’s managers believe valuations are more attractive in Taiwan when compared with China, which explains the fund being overweight Taiwan.

“The managers have been trimming its China exposure during the last 12 months and have been adding to Taiwan,” he added.

Sector exposure is also different, Ng said, adding that while the Invesco fund sees more opportunities in consumer staples, the JP Morgan fund finds long-term growth opportunities in technology and financials.

Source: Morningstar

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