Wenli Zheng, T Rowe Price
The T Rowe Price (Sicav) China Evolution Equity Fund is the firm’s first China-focused equity product to be made available to retail investors in Hong Kong, said a spokeswoman.
It has posted a 32.1% return since inception on 10 August 2020, compared with 30.2% by the MSCI China Index and an average 26.7% by China equity funds available to Hong Kong retail investors, according to FE Fundinfo. Its AUM as at the end of last year was $10.1m.
“We believe the rapid pace of economic change may enable future winners to innovate and disrupt. The fund seeks to identify future winners, and exploit mispricing opportunities through a style-agnostic, index unconstrained approach,” said the manager of the fund, Wenli Zheng, who is based in Hong Kong and has been with T Rowe Price for 14 years.
Zheng mainly targets companies in the bottom 50% of China’s combined market cap, which covers over 98% of listed companies, rather than the top 50 index heavyweights, and tends to favour China’s early-stage innovative companies and companies in traditional industries that are revamping their existing businesses through innovation.
Against its benchmark MSCI China All Shares Index, the portfolio’s significant overweights are consumer discretionary (9.0%) and industrial and business services (12.6%), and its main underweights are financials (-15.6%) and communication services, according to the most recent fact sheet.
Top holdings include Country Garden Services, Nari Technology, Batang Electric Suzhou, Media Tek and Fuyao Glass Industry.
“Hong Kong retail investors have long been familiar with China’s heavyweights. To complement their investment portfolios, the T Rowe Price Funds Sicav – China Evolution Equity Fund aims to look beyond well-owned mega-caps to identify under-discovered opportunities that we believe will benefit from China’s disruptive innovation,” said Priscilla Leung, the firm’s head of intermediary business for Greater China.
“The authorisation [of this fund] forms part of the firm’s long-term growth plan for Asia to provide a broader range of products for the region’s investors,” she said.
In January, the firm formed a partnership with Standard Chartered Bank to distribute two other Sicav sub-funds to Hong Kong retail investors — the $3.8bn Global Focused Growth Equity Fund and the $3.2bn US Large Cap Growth Equity Fund.
T Rowe Price set up its Hong Kong office in 1987, and has a total of 27 funds authorised by the SFC.
GLOBAL EQUITY GROWTH
The firm also obtained SFC authorisation last week for its T Rowe Price (Sicav) Global Growth Equity Fund, which is a high conviction, global equity portfolio that invests in companies with the potential of sustainable growth characteristics, according to the spokeswoman.
Launched in October 2008, the $545m fund is managed by Baltimore-based Scott Berg, who has been with T Rowe Price for around 18 years.
The fund has generated a three-year cumulative return of 77.2%, outperforming its benchmark MSCI All Country World Index (45.0%), and its international equity sector average (35.4%), according to FE Fundinfo.
Its annualised volatility of 20.6% is higher than both its benchmark (20.3%) and its peers (18.8%) over the period, but the fund has a far superior Sharpe ratio (a measure of risk-adjusted returns) of 0.88, compared with 0.41 for the index and 0.34 for the sector average, FE Fundinfo data shows.
Significant country overweights are Germany, India and the UK, and although the US makes up 53% of the portfolio, the exposure is 3.6% less than the benchmark.
Sector overweights include consumer discretionary and financials and the fund is underweight energy and consumer staples, according to the most recent factsheet (31 December 2020). Top holdings include the major tech growth stocks, Amazon, Alphabet, Facebook, Alibaba and Apple.
“The acceleration of secular changes has created a profound impact on the investment environment where diversification becomes a very key element to capture durable investment return,” said Leung.
Founded in 1937, Baltimore-based T Rowe Price $1.47trn in AUM as of 31 December 2020, according to a statement.
T Rowe Price China Evolution Equity Fund: sector allocation
|Sector||% of fund||Fund vs|
|Industrials and business services||20.2%||+12.6%|