Shortage of A-share analysts dawns on UK firms

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The inclusion of 230-odd China A-shares was a hugely symbolic moment for UK and European investors but the region’s fund industry has failed to get ahead of the curve, with most firms lacking dedicated teams of analysts or products to invest in.

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Although most asset managers have products aimed at UK retail investors that can invest in China A-shares, very few have dedicated analysts in-house.

Instead most have carved out A-shares support from their existing Asia ex Japan or China research teams.

FSA’s sister publication Portfolio Adviser asked nine asset managers – Schroders, Baillie Gifford, Janus Henderson, JP Morgan Asset Management, Eastspring Investments, Blackrock, Old Mutual Global Investors, Alliance Bernstein and M&G – about the depth of their in-house A-shares capabilities.

While most firms say a good chunk of their analysts could cover A-shares, the number of analysts that actually do cover the asset class on a daily basis is significantly smaller in most cases.

Janus Henderson has only two analysts dedicated to China and A-shares within its Asia ex-Japan team, for example.

Baillie Gifford has 55 investment professionals who could look at and invest in Chinese stocks but only five look at A-shares directly and hold them in their portfolios.

JPMAM, which has one of the largest China research teams of the firms assembled, does not have any dedicated A-shares analysts as such but the asset class is covered by 21 research analysts. Within that is a team of 11 Greater China product analysts that cover A-shares, including dual listings.

Some firms say they do not have separate A-shares analysts because of the way in which their research is conducted.

Schroders, for instance, takes an “All China” approach to China equity research regardless of the listing location of the stock. The FTSE 100 asset manager does have a head of A-shares research, Jack Lee, who is based in Shanghai with a team of four other analysts. It has a further 14 analysts located in Hong Kong, Taipei and Singapore who cover Chinese equities, including mainland stocks.

M&G says its team of central analysts covers sectors as opposed to countries. It allocates analysts to funds that are generalists in remit.

Prudential’s other asset manager, Asia-based Eastspring Investments does not have any dedicated A-shares analysts either. Its China value team looks at both A-shares and B-shares.

But CIO Virginie Maisonneuve says the firm is in the process of building “a very nice team in China” with A-shares-specific analysts but has not publicly disclosed its plans yet.

A-shares funds

UK investors still seem split on just how transformative the MSCI A-shares inclusion will be for emerging markets and Asia.

Though all nine firms Portfolio Adviser consulted have products that can invest in China A-shares many only had a portion of funds that currently do.

OMGI’s China Equity fund, previously run by Josh Crabb, is the fund group’s only product that has positions in A-shares currently. In March it outsourced this mandate to Hong Kong asset manager Ping An.

It has five other funds, including the £528m ($798m) Old Mutual Asia Pacific fund, that can invest in the asset class.

Baillie Gifford has eight funds that can access A-shares via the Hong Kong stock connect. Only three of its funds – the Great China fund, Asia Pacific fund and Pacific Horizon Investment Trust – are invested in A-shares now.

Only four managers that Portfolio Adviser spoke to – Blackrock, JPMAM, Alliance Bernstein and Schroders – had at least one dedicated A-shares fund.

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