From darling to daunting, the Chinese equity market has become a tough asset to class excel in recently. Citywire Investment Research’s Nisha Long spotlights the fund house best facing up to these hardships.
Fund managers in Chinese equities are a resilient bunch. Over the past seven years nearly half of the 94 managers we track in the sector have outstripped their Citywire-assigned benchmark. More surprisingly, 73% have outperformed in the past year.
These investors have had to contend with China’s ‘Black Monday’ market crash in August 2015, as well as the slump at the beginning of this year, which caused global markets to fall to levels not seen since the 2008 financial crisis.
Nevertheless, astute managers have been able to tap pockets of value and growth in the region and it’s these consistent long-term outperformers that Citywire Group Ratings highlights this month.
Group in focus: GAM
|Fund Manager||One year||Three years||Five years||Seven years|
|Jian Shi Cortesi||10/82||n/a||n/a||n/a|
*figures accurate to the end of March 2016
Lai has managed the GAM Star China Equity fund since its inception in July 2007, which is a concentrated portfolio of about 40 to 50 stocks, focused on quality growth companies.
His long-standing bias towards the domestic consumption story in China has fuelled impressive returns in varying market cycles.
His strongest year of performance came as the fund emerged from the credit crisis when he returned 111%. His most challenging year was 2008 itself, when his fund lost 36.1% in USD terms.
In 2015 Lai had a strong start to the year and returned 23.5% in the first half. However, like many of his peers in the sector, he suffered losses of 23.9% in the third quarter alone, which was due to the country’s stock market crash. Lai made up some of this lost ground in the final quarter of the year and overall the fund was up 3.6% on the year.
This year has again proved tough so far and Lai was down 11% in the first quarter. Despite this short-term struggle, over the past seven years he has returned 140%, almost double the figure of the average manager in the sector.
GAM’s other Chinese equity manager, Jian Shi Cortesi, has run the Julius Baer EF China Evolution fund since its inception in December 2013. Cortesi has been tested with two significant regional market crashes in the second year of her tenure on the fund.
However, she has used the market’s volatility to her advantage by hunting out stocks that looked cheap after they plunged in value.
In addition, she shielded her portfolio from the worst of market turbulence by investing in large caps, avoiding smaller companies and focusing on shares that are less correlated with the markets.
This article originally appeared in the May edition of Citywire Selector magazine.