Three decades of rapid economic acceleration in China has under increasing scrutiny over the past few years as the sustainability of this growth came into question.
While analysts agonised over whether the country would face a hard or soft landing as its GDP expansion slowed, how did China equity managers fare?
At present, there are 69 fund managers in the Citywire database running a dedicated China equity fund. Out of these, 32 have a five-year track record reaching back to July 2009.
Over this timeframe, the average manager in the sector returned 19.27%, while the most commonly held benchmark, the MSCI China TR USD, rose 25.8%.
However, the volatile market has caught many of the participants out at one stage or another, and only two of the 32 longer-running managers have consistently beaten the average peer performance.
So, who are the standout managers and how did they manage to keep their heads above water?
Frank Yao, Neuberger Berman
Five-year total return (July 2009-2014): 46.7%
Best year of outperformance vs. average manager: +7.88% in 2013/14
Operating with a mid-to-large cap focus, Frank Yao has outperformed in each of the past five years with a comfortable margin. Yao aims to keep the $186 million broadly diversified across a range of sectors.
This has seen him take minor overweights in telecoms and consumer discretionary, while holding minor underweights in industrials and, the index’s biggest sector allocation, financials. He mainly invests through H-Shares and Red Chips but also has some A-Shares exposure.
On a stock-specific basis, Yao’s three largest holdings are currently in financials groups Ping An Insurance and Industrial and Commercial Bank of China (ICBC), as well as automotive company Dongfeng Motor Group.
Yao has been lead manager on the fund since July 2009 and is supported by Lihui Tang. The team, known as the Greater China Investment Team, is based across both Shanghai and Hong Kong.
Anthony Cragg, Wells Fargo
Five-year total return (July 2009-2014): 39.11%
Best year of outperformance vs. average manager: +4.89% in 2013/14
Vying for dominance in the sector is Wells Fargo’s Anthony Cragg, who has overseen the US asset manager’s dedicated China equity fund since its launch as a Ucits-compliant vehicle in January 2009.
In the $41.5 million fund, Cragg has a much stronger weighting towards industrials than Yao. This sector makes up 15.8% of the fund, which is 9 percentage points more than the index. However, in a similar vain to his outperforming counterpart, he is slightly underweight financials.
At present, the largest position in the fund, which has a total of 88 holdings, is a 5.7% allocation to the Agricultural Bank of China. This is ahead of financials group ICBC (5.1%), internet and software company Tencent Holdings (4.6%) and the Bank of China (4.5%).
Cragg currently runs four funds on behalf of Wells Fargo, these cover Chinese equities, emerging market equities and Asia Pacific equities.