Most consistent funds of the decade: China
Not a single fund in the IMA China/Greater China sector was able to deliver top-quartile returns from both 2002 to 2007 and 2007 to 2012.
By Jenna Voigt, Features Editor, FE Trustnet
Thursday November 01, 2012
The five crown-rated £520m First State Greater China Growth
fund is the only one in its sector that is even close to achieving consecutive top-quartile performance over the two most recent five-year periods, according to data from FE Analytics
Managed by FE Alpha Manager Martin Lau and Sophia Li, it has been a top-quartile performer since launch nine years ago. Over this period it has nearly doubled the returns of the sector, delivering 304.80 per cent compared with 152.7 per cent from IMA China/Greater China.
It has also outperformed the MSCI Golden Dragon index, which made 133.03 per cent over the period.
Performance of fund vs sector and benchmark since launch
Source: FE Analytics
Of the seven funds in the sector that have full 10-year track records, none have delivered top-quartile performance over the two consecutive five-year periods since 2002, according to FE Trustnet
China has been facing a slowdown for several years. This has hampered the funds that previously took advantage of unparalleled levels of growth in the world’s second-largest economy.
GDP in the country only grew by 7.4 per cent in the third quarter, the slowest rate in three years, while in the seventh consecutive quarter it decelerated.
In the five years since 2007, these seven veteran funds have struggled to keep up with newer entrants to the market and failed to provide consistent returns during the vastly differing economic conditions that have characterised the region since 2002.
The four crown-rated £455.1m Henderson China Opportunities
fund shot the lights out in the five years from 2002, returning 535.94 per cent while the sector returned 305.57 per cent, but it has lagged competitors over the subsequent five years, delivering third-quartile returns.
The $1.2bn Invesco PRC Equity fund fared even worse after 2007, delivering a bottom-quartile loss of 26.1 per cent over the period, after returning 533.04 per cent from 2002 to 2007.
Fund performance over consecutive five-year periods
Source: FE Analytics
Both the Henderson and Invesco funds underwent manager changes roughly five years ago, with Charlie Awdry taking over the Henderson portfolio in June 2006 and Joseph Tang taking the reins of the Invesco vehicle in July 2007.
Ben Seager-Scott, senior research analyst at Bestinvest, is reluctant to allocate specifically to China as he claims the region is plagued with extraneous factors that contribute to an increased level of volatility.
"When you’re looking at China, you’re better off with a regional manager, maybe a Far East manager," he said.
"When you look at Asia there have been better growth opportunities outside of China."
He adds that the benchmark is exceptionally difficult to outperform and managers who only have access to China are subject to wide swings in performance because they cannot hedge away from risks such as inflation and political factors.
"China is quite a difficult place to invest, even for very experienced managers," he explained. "It is a difficult benchmark and very difficult to consistently beat."