The research firm’s report on China’s best mutual fund ideas selected 19 onshore funds based on fund manager experience, consistency in investment strategy and performance, Wang, who is based in Shenzhen, told FSA.
Among the products, Wang chose the Invesco Great Wall Core Competence Fund, a mixed-asset product, as her “best of the best” (FSA profiled this fund in the Head-to-Head feature in November).
Although Invesco Great Wall is a Sino-American joint venture, the strategy of the fund is different from funds managed by other JVs, most of which chase after higher returns, Wang said. With a high turnover and the focus on timing the market, sector rotation and anticipating themes, many resemble hedge funds in Western markets.
Wang observed that Guang Yu, who manages the IGW fund, has a more robust, methodical approach. “With seven years’ experience in fund management, he invests with a consistent philosophy for a medium-to-long term growth,” she said. “He also prioritises the stocks’ valuation and fundamentals in bottom-up stock selection.”
Although the IGW fund did not manage to capture large gains from the rally of small and mid-caps in China’s A-shares markets in recent years, it still posted steady returns, Wang said.
Yu has a preference for the consumer product sector. As of 31 October, the most recent data available, the fund held a number of household appliances makers in China, such as Vatti Corporation, Gree Electric Appliances and Midea Group, according to the fund factsheet. Demand for these consumer products has pushed the stock prices higher and become a major contributor of the fund’s gains this year, Wang added.
Despite the mixed-asset label, the fund does not have holdings in bonds and is essentially an equity fund.
Morningstar’s China Best Ideas
(*) newly added in this issue
Source: Morningstar
The research team removed three funds from the previous list of best ideas due to a change of managers. They are: the ABC-CA Consumption Theme Equity Fund, the CIFM China Multi-Assets Fund, and the Great Wall Active Return Increase Bond Fund.
MRF scheme
The report, aimed at global investors, includes 13 out of the 19 funds that are available for sale via the Mutual Recognition of Funds. Through the scheme, eligible investors in Hong Kong and abroad are able to buy and sell onshore funds in the mainland, and vice versa.
Most southbound MRF funds – mainland funds sold in Hong Kong – are managed by joint ventures of mainland and foreign fund management firms. They give foreign investors an opportunity to tap the skills of local fund managers in China, who are more attuned to the idiosyncrasies of the country’s policy-driven stock market.
However, southbound sales remain unpopular. In November, the monthly net sales of southbound funds merely surpassed RMB 6m, compared to northbound sales of RMB 384.1m, according to the monthly figures by the State Administration of Foreign Exchange (SAFE).
Performance of the Invesco Great Wall Core Competence Fund versus the category average and the MSCI China index.
