With returns of 133 per cent since launch, five FE Crowns and FE Alpha Manager Martin Lau at the helm, it was of little surprise that IFAs were disappointed when the First State Greater China Growth portfolio was soft-closed back in January 2012.

However, in Aberdeen Global Chinese Equity – another FE five crown-rated fund – investors have a more than adequate alternative. The fund has returned 1,226.6 per cent since it was launched in April 1992.

Performance of fund since launch vs sector



Source: FE Analytics

Aberdeen Global Chinese Equity is not on many investors’ radars since it is domiciled offshore in Luxembourg. However, the portfolio is FSA-recognised, and in FE Alpha Manager Hugh Young it has one of the most respected emerging market managers in charge.

Young and his team have been extremely competitive in recent years as well: over a five-year period the fund has amassed 71.63 per cent, outperforming its MSCI Zhong Hua benchmark by nearly 20 per cent. In the IMA China/Greater China sector, only First State Greater China Growth has returned more, with 82.38 per cent during this time.

However, Aberdeen Global Chinese Equity has a lower annualised volatility than its rival over five years, scoring 21.82 per cent compared with 21.98 per cent, according to data from FE Analytics. This suggests the fund may be better placed to cope with a potential slowdown in the Chinese economy than its rival.

Performance of funds vs sector and index over 10-yrs

Name	1yr (%)	3yr (%)	5yr (%)	10yr (%)
First State - Greater China Growth	-2.43	67.03	82.38	N/A
Aberdeen Global - Chinese Equity	-1.05	78.76	71.63	247.29
MSCI Zhong Hua	-9.36	41.28	52.84	201.03
IMA China/Greater China	-14.08	37.76	47.95	213.21

Source: FE Analytics

Aberdeen’s fund is also the second-best performer in the sector over three years, with returns of 78.76 per cent. Only GAM Star China Equity has returned more over this period, although with significantly more volatility.

On a one-year basis the Aberdeen fund outperformed First State’s, losing only 1.05 per cent in a tough year for the sector, compared with -2.43 per cent from First State Greater China Growth.

This was a good result in a year when the MSCI Zhong Hua benchmark fell by 9.36 per cent and the IMA China/Greater China sector fell by 14.08 per cent.

Tim Cockerill, head of investment at Rowan Dartington, believes that Young's portfolio is a worthwhile alternative to Lau's. 

"There are a lot of similarities between the way Aberdeen and First State run money," he said. "With both management firms you are getting a more cautious and conservative approach with a long-term perspective." 

With $1.5bn assets under management (AUM), the portfolio is already far larger than the recently soft-closed First State China Greater China fund. However, Aberdeen Global Chinese Equity is still open to new money, at a minimum one-off investment of $1,500.

While First State said that it needed to stem inflows to maximise performance, a spokesperson for Aberdeen said it had no plans to soft-close its own China portfolio anytime soon.

"We’re happy with the rate of inflows and the management are very comfortable with running the portfolio at its current size," they said.

At 1.96 per cent its total expense ratio (TER) is far lower than the average China fund, and competitive with the 1.84 per cent demanded by its First State rival.

Aberdeen Global Chinese Equity has been increasing its exposure to financials, industrials and the telecoms industry, recently upping its stake in China Mobile to 4.7 per cent of its portfolio, while holding 4.5 per cent in ASM Pacific Technology, Standard Chartered and consumer goods supply chain manager Li & Fung.

Fears of a hard landing for the Chinese economy have intensified after GDP growth fell to 8.1 per cent for the first quarter, its lowest level in three years and below economists' forecast of 8.3 per cent.

However, Fidelity’s Trevor Greetham said that the weaker-than-expected figures signalled the end of the slow-down and that the Chinese authorities had a handle on the situation.