Kristian Heugh, Morgan Stanley Investment Management
The $6.5bn Morgan Stanley (MS) INVF Asia Opportunity Fund was authorised by the Securities and Futures Commission (SFC) on 7 December for distribution to Hong Kong retail investors, according to the regulator’s website.
“The registration of the fund aims to complement Morgan Stanley Investment Management’s (MSIM) existing Hong Kong authorised product offerings [which now total 18], including MS INVF Global Opportunity which was registered in March 2011 and is among MSIM’s top-selling funds locally,” said a spokesman for MSIM.
Several asset managers, including Aberdeen Standard Investments, Fidelity, JPMAM, Robeco, T Rowe Price, and UBS AM, are optimistic about Asian equities in 2021, while Asia-based fund selectors turned strongly positive about China shares in October, according to Last Word Media research.
The MS INVF Asia Opportunity Fund, which was incepted in March 2016, seeks long-term capital appreciation by investing in high quality established and emerging companies located in Asia (excluding Japan) that the investment team believes are undervalued at the time of purchase.
“To achieve its objective, the investment team typically favours companies it believes have sustainable competitive advantages that can be monetised through growth,” said the spokesman.
“The investment process integrates analysis of sustainability with respect to disruptive change, financial strength, and ESG factors,” he said.
The fund is managed by Hong Kong-based Kristian Heugh, head of the global opportunity team, and co-managed by Anil Agarwal.
Agarwal replaced Krace Zhou, a top performing Asia Pacific equity manager, who left Morgan Stanley last May and set up Asia-focused investment boutique Stillbrook Capital in October.
“MS INVF Asia Opportunity is managed by the same investment team that manages Global Opportunity, and was selected based on its strong performance and anticipated demand for regional equities,” said the spokesman.
The fund has posted a three-year cumulative return of 84.24% in US dollar terms, significantly outperforming its benchmark (26.15%) and the average return of similar products available to Hong Kong investors (19.96%), according to FE Fundinfo.
The fund has been more volatile over the same period, with annualised volatility of 21.47%, compared with 19.15% by the MSCI AC Asia ex-Japan index and 18.21% by its peers.
However, it has a far superior Sharpe ratio of 0.9 than the sector average of 0.16, and has generated 16.34 of alpha during the past three years, FE Fundinfo data shows.
The fund has a five-star rating from Morningstar and been awarded five-crowns by FE Fundinfo.
Its current portfolio has large overweight exposure to China (62%) and India (16%), and is underweight South Korea (4%) and Taiwan (7.0%), the most recent factsheet shows. The fund’s outsize sector allocations compared to its benchmark are to consumer discretionary (35%) and consumer staples (16%), and its biggest underweight is IT (6%).
MS INVF Asia Opportunity Fund allocation
The portfolio’s divergence from its benchmark is also reflected in its individual holdings, with big bets on Chinese online shopping platform Meituan, HDFC Bank, Tal Education, Chinese sauce manufacturer Foshan Haitian Flavouring and South Korean web search engine operator Naver Corp.
MSIM plans to sell the fund through select distributors with requirements for SFC authorised funds, such as insurance firms, said the spokesman.
The share classes registered in Hong Kong are Class A, C, CH (EUR), which have ongoing charges figures of 1.89%, 2.69% and 2.73% respectively, according to the fund factsheet.
MS INVF Asia Opportunity Fund vs benchmark and sector average