Best Greater China Equity Fund: Winner

We spoke to the winning managers and asked them about their strategies. Here is an edited excerpt:

Question: How was the portfolio positioned to navigate the coronavirus-driven market volatility in 2020? Were there any particular holding(s) or theme(s) that drove the fund’s performance for the year?

Answer: With a quality and growth focus, our structural biases are on sectors such as Technology, Healthcare and Consumer Discretionary. The pandemic accelerated some of the existing structural trends, therefore benefitting the Fund’s performance. Key contributors include software names in the IT sector on the back of accelerating cloud adoption, medical equipment and outsourcing research contract names in the Healthcare Sector because of increasing demand for such products and services, and e-commerce names in the Consumer Discretionary sector.

Question: Against the backdrop of (i) the vaccine rollout, (ii) a new US administration, and (iii) ongoing monetary easing globally, what is your outlook for 2021, and how are you expressing these views in your portfolio?

Answer: Amid a global economic recovery, alongside developed market demand, we have emphasized our more cyclically-sensitive holdings in the portfolio. For example, we have core positions in technology cyclicals such as semiconductors and panel makers, as well as growth financials such as Chinese insurers and mid-sized banks.  We have incrementally been adding to our exposure here at the expense of more defensive growth equities.  That said, we believe 2021 is a one-time recovery event, after the bounce from 2020’s COVID-19 lows for cyclicals, and we will revert to slower but higher-quality growth looking forward.

Question: What are the top risk factors that could have an impact on your portfolio, and how are you positioned to mitigate these potential risks?

Answer: There are emerging risks of rising inflation and asset price bubbles in the China market. We believe this is likely a risk factor that Chinese policy makers remain mindful of as they continue to support economic recovery. Our base case expectation remains a normalisation in the domestic stimulus policies with a long-term focus on better quality growth. While we have tilted more towards cyclical sensitivity, we do run medium to long-term growth portfolios which may exhibit greater negative sensitivity to the short-term resumption of inflation. 

Question: How is your investment team organised? Have there been any changes to the investment team or structure over the past year? Do you anticipate adding to the team in the near future?

Answer: We aim to combine the complementary research strengths of a local firm - with our 14 dedicated Greater China analysts in Shanghai, Hong Kong and Taipei - and an international one - with the connectivity between these analysts and their global and regional counterparts. We also run portfolios as a tandem, with Rebecca Jiang and Howard Wang, together discussing and acting on ideas across our portfolios.  Our team-based approach means we blend the information, experience and insights of multiple investment professionals rather than express the views of one or two managers. We will continue to add analysts and portfolio managers across our Greater China platform, with an emphasis on widening research coverage.

Question: Where do you feel that the investment team or the investment process can be improved upon in the future?

Answer: The investment opportunity set in the onshore market continues to grow. We look forward to working even more closely with the Chinese equity experts in our joint venture in Shanghai, China International Fund Management Co (CIFM), leveraging their on-the-ground market insights and investment expertise. We also intend to continue adding dedicated sources to enhance our investment process, such as onshore research analysts, and continue our long history of investing significant resources in our fundamental research capabilities.