Willis, head of research at Whitechurch Securities, says he had sold out of his China exposure as its economy slowed down, but he thinks the worst is over and that now is the time to buy back in.He says he is buying the £474m small and mid cap focused Henderson China Opportunities fund in order to make money from the country’s emerging middle class.
"I have started to go into China again in my pension," Willis said. "I have just bought Henderson China Opportunities."
"I’d probably say it’s not my first choice. I really like the First State Greater China Growth fund but unfortunately it is now soft-closed."
"We also hold GAM Star China Equity on our panel, but that is offshore so I can’t hold it in my pension."
"I tend to take fairly aggressive positions with my pension; I can afford to really because I can’t see myself retiring any time soon, so I am happy to park my money with Henderson China Opportunities and let it ride."
"I moved out of China a couple of years ago after it had done so well and I started to hold funds with more broad emerging markets exposure for my pension. However, now the general consensus is that the Chinese economy is bottoming out."
"China really is like Marmite at the moment – you either love it or you hate it – and yes of course, you do need to be selective but valuations are now way off their peaks of 2007."
As Willis says, investors in China have had a tough time of late, although Chinese equities have produced high returns over the longer term.
According to FE Analytics, the MSCI Zhong Hua index has returned 373.62 per cent over 10 years while the MSCI World has returned 130.22 per cent.
Performance of indices over 10yrs
Source: FE Analytics
However, as the graph shows, the Chinese index has been heavily affected by falling markets. In 2008, it lost 31.96 per cent while the MSCI World lost 17.92 per cent and in 2011 it lost 17.04 per cent – 13 percentage points more than the global index.
Despite this, Willis says he is willing to weather the volatility as China is still one of the best growth markets around and that Henderson China Opportunities is well placed to benefit.
"With a fund like Henderson China Opportunities, you are buying a long-term growth trend."
"China’s urbanisation and good demographics, along with the move from an export-driven economy to a consumption-led one, all mean the long-term outlook for China looks good," he said.
"If I make significant gains from the fund over the short- to medium-term, I may review my exposure, but by purchasing Henderson China Opportunities I should be holding a fund that is buying companies with cheap share prices."
The Henderson China Opportunities fund was launched in 1983. Charlie Awdry has managed it since June 2006, taking over from Philip Ehrmann who now runs the £195m Jupiter China fund.
Since Awdry has been at the helm, Henderson China Opportunities has returned 121.11 per cent while the IMA China/Greater China sector has made 118.49 per cent.
However, it has underperformed against its benchmark – the MSCI Zhong Hua – which has returned 132.56 per cent over this time.
Performance of fund vs sector and index since June 2006
Source: FE Analytics
The fund has also tended to be more volatile than the sector and its benchmark over this time.
Although the fund beat both the sector and index during the first three years of Awdry’s management, Henderson China Opportunities has struggled in recent months.
It returned just 4.16 per cent in 2012, falling short of its benchmark by 15 percentage points.
However, the fund has started 2013 well and has returned 7.65 per cent, while the index and the sector have returned 3.83 per cent and 4.76 per cent, respectively.
Despite the fund’s patchy short-term performance, Willis is a fan of the manager’s hands-on style.
"It is one I like and one that we have on our panel," he said.
"Awdry has been running the fund for quite a while now and he has produced good numbers over the years. He runs a small to mid cap oriented portfolio and Awdry gets over to China quite a lot to see company management teams."
"He has done well in the past and I do rate the fund, though it has had a fairly turgid 18 months," he added.
Henderson China Opportunities primarily holds companies listed in both Hong Kong and mainland China.
However, the fund can also supplement that exposure by owning American depositary receipts (ADRs), but they only make up 1.5 per cent of the fund’s assets under management.
Awdry currently runs a portfolio of 51 holdings. The fund’s largest sector weighting is to Chinese banks, making up 15 per cent of the total portfolio. Awdry also has high exposure to China’s real estate and insurance sectors.
Henderson China Opportunities has an ongoing charges figure (OCF) of 1.5 per cent and requires a minimum investment of £1,000.