We present the best Chinese equity managers from our Citywire 1000 analysis who have outperformed in the world's second largest economy.
Chinese equity markets have undergone a challenging period with economic uncertainties weighing on investors’ minds. For those looking to an area that is out of favour after large market falls, investment opportunities in companies with strong growth at low valuations can be found.
Although the going has been tough, analysis in Citywire 1000 shows the few Chinese equity managers who have performed in this difficult environment.
Citywire 1000 is a ranking of the best global fund managers, based on their positive total return and risk adjusted performance over the last three-year up to June 2012.
Our analysis shows that the level of outperformance in China is the lowest amongst other emerging market countries such as India, Russia and Brazil. Citywire tracks 160 managers in the China and Greater China region and only 9% of these managers in the sector have made the cut, which totals to just 15 fund managers. These 15 managers manage between them a total of 31 funds.
First State’s Xian Quanqiang is a specialist in Chinese equities and runs the First State China Focus Fund.
With an overall 249th position, he focuses on large and mid-capitalised companies with a market value of at least $1 billion. These companies are either based in or have significant operations in mainland China.
The fund returned an impressive 31.1% over the three years till the end of June 2012, more than doubling MSCI Zhong Hua Index’s 13%.
Its two largest sector allocations in the portfolio are financials at 22.6% and information technology at 22.5%. The fund’s maximum drawdown and standard deviation are both lower than the index at -19.4% and 20.6% respectively.
With 35 months of track record Neuberger Berman’s Frank Yao is in 237th overall and third in our Chinese equity ranking, owing to his strong risk-adjusted performance.
Yao looks for long term capital growth and inflation protected income by investing in Chinese companies listed in Hong Kong, overseas and domestic Chinese markets.
He runs the Neuberger Berman China Equity fund and has a value bias. While he is benchmark aware his approach is not limited by it, visible from his 5% holding in China Mobile while his benchmark has it as its top holding at 10.5%. The fund is also not invested in other of the benchmark’s top holdings such as CNOOC and Bank of China.
Since inception the fund has returned 7.6% while the benchmark index MSCI China has risen -4.8%.
Next up in second place - 137th spot in the overall rankings - is Aberdeen’s Asia expert Hugh Young.
Young runs a number of funds in Asia and the emerging markets and he is among the top three managers in both Chinese and Indian equity markets.
Young runs the Aberdeen China Opportunities fund and Aberdeen Global Chinese Equity Funds, returning 39.4% over the analysis period.
He aims for long term growth by investing at least two-thirds in equities of companies with office, assets or the majority of their business activities in registered Chinese companies.
Financials and industrials form a major part of his portfolio with around 35% and 20% invested in each of the two sectors.
Big names such as Jardine Strategic Holdings, China Mobile, CNOOC, PetroChina and Standard Chartered are among his top 10 holdings.
In the number one spot holding the 70th overall position is President Investment Trust’s Ji-Sheng Zhang, who runs the UPAMC Great China Fund.
Zhang returned an impressive 41.9% more than doubling the performance of the MSCI Golden Dragon at 19.2% during the period, but carries a standard deviation greater than the market. The manager pursues long term capital appreciation and stable income by investing a minimum of 70% of the fund’s net assets in equities from Taiwan, Hong Kong and Singapore.
The fund’s Top 5 holdings have 30% assets allocated to manufacturing and technology companies.
To find out more about Citywire 1000 and to order a copy visit www.citywire1000.com
Performance analysis for the Chinese equity sector has been calculated in US Dollars over three years to 30 June 2012.