In focus
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FE Alpha Manager Martin Lau attempts to keep downside risk to a
minimum when investing in the volatile Chinese market
FE TRUSTNET
companies we own have preserved
capital better during previous
downturns. Declining markets are
often seen as a negative, but we view
such periods as opportunities to buy
high-quality companies at cheaper
valuations – which helps to compound
returns in the long run.”
FACT BOX
MANAGERS: Martin Lau & Helen Chen / LAUNCHED: 1/12/2003 / FUND SIZE: £492.8m
/ OCF: 1.05%
FE CROWN RATING
PERFORMANCE OF FUND VS SECTOR AND INDEX OVER 10YRS
First State Greater China MSCI Golden Dragon IA China/Greater
Growth (222.36%) (134.88%) China (117.05%)
250%
200%
150%
100%
50%
0%
11
-50%
companies (defined as those led by
strong management teams, with
dominant franchises and a long-term
track record of sustainable earnings
growth) at attractive valuations.
Like all First State funds,
environmental, social and governance
(ESG) criteria are an important
consideration and Lau will refuse to
invest in China’s largest companies if
he has concerns over their governance.
This approach appears to be working.
The fund has made 222.36 per cent
over the past 10 years compared with
117.05 per cent from its sector average
and 134.88 per cent from its MSCI
Golden Dragon benchmark.
Of course, the trade war with the US
is an additional challenge for investors
in China at the moment. However, in
a recent update Lau said that while
this has dented market sentiment, the
uncertainty is creating opportunities
for quality investors.
L
ike all emerging markets,
investing in China comes with a
wide range of risks but there are
funds focused on the world’s second
largest economy that aim to offer as
much downside protection as possible.
First State Greater China Growth,
run by Helen Chen and FE Alpha
Manager Martin Lau, is one example.
It has the IA China/Greater China
sector’s second lowest scores for
volatility, maximum drawdown and
downside risk over the last decade, as
well as its best Sharpe ratio.
Lau has more than 20 years’
experience of investing in China and
has worked on the £492.8m fund
since its inception in December 2003.
He has developed a low-turnover
process over this time, ingrained
with an absolute-return focus and
benchmark-agnostic stance.
The fund has a bottom-up, all-
cap approach that looks for quality
“Having invested in China A-shares
since 2009, over numerous cycles and
market scares, we believe our bottom-
up stock selection and focus on quality
should continue to deliver positive
returns,” he explained.
“While our portfolios have not been
immune to market volatility, the
First State Greater
China Growth
Source: FE Analytics
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