AsianInvestor’s choice of top funds, explained (part 2)
Every year, AsianInvestor's editorial team conduct an intensive analysis of the region's leading asset management service providers, fund products and asset managers, to ascertain the top organisation of the previous year.
The winners of these categories combined a mixture of business performance, growth and progress, measured on both quantitative and qualitative criteria.
Below, we detail why we plumped for the winners of the second half of our asset class awards this year, China fixed income, global and regional equity asset classes, and the best real estate investment trust (Reit) and smart beta funds.
Quantitative data on fund performance over several years was provided by eVestment and Mercer.
CHINESE DOMESTIC FIXED INCOME
Fidelity International
China High Yield Fund
Fidelity International’s China High Yield Fund won our Chinese domestic fixed income category chiefly for its outstanding performance and consistent performance.
According to eVestment, the fund ranked top for returns over one and three years, with its Sharpe ratio gaining the first place over three years. The fund doesn’t have a benchmark, as it follows a high conviction strategy and flexible approach to its issuer and sector constrained mandate.
The vehicle seeks to generate a high level of income by investing primarily in high-yielding, sub-investment grade or non-rated debt securities of issuers that are headquartered or active in the Greater China region. It focuses on bottom-up security selection, with a focus on income and a bias towards high quality issuers and liquid holdings. Liquidity management plays a key role, as the fund holds relatively high level of cash and cash equivalents.
The fund’s lead portfolio manager is Bryan Collins, who has been with Fidelity International since 2006 and is set to leave the fund house on June 30. He has been supported by Tae Ho Ryu and Terrence Pang, co-portfolio managers of the fund and Asian High Yield Fund, as well as Peter Khan, portfolio manager of global high yield, total return credit (multi-asset credit and income) and absolute return bond portfolios. Ryu and Pang will take over Collins's role as joint lead managers of the Asian high yield and China high yield portfolios on July 1.
GLOBAL EQUITY
Wellington Management
Global Technology
Wellington Management’s Global Technology strategy has earned our award in the global equity category for strong, consistent performance over the several years as it has take advantage of the advance of technology across the world.
The vehicle focuses primarily on equity securities of tech companies worldwide to provide long-term capital appreciation. Since its inception in 1997, the fund’s investment philosophy is based on an industry-focused, bottom-up approach. It analyses the competitive outlook for various subsectors of the technology industry and identify subsectors that are likely to benefit from the current and emerging trends.
It has executed that focus very well. The fund ranked top three for both returns and its Sharpe ratio over one, three and five years, while it outperformed the S&P North American Tech Sector Index by a considerable margin in 2019. It also generated alpha over the MSCI ACWI Information Technology Index, a secondary benchmark, over 10 years.
The strategy is globally managed by five senior investment executives, including John Averill, Eunhak Bae, Brian Barbetta Bruce Glazer and Jeff Wantman, alone with five technology analysts who cover various subsectors.
EMERGING MARKET EQUITY
Columbia Threadneedle Investments
Columbia Emerging Markets Opportunity
The Columbia Emerging Markets Opportunity fund stands as our pick as the standout performer for emerging market equity investing, thanks to its mixture of strong returns and high Sharpe ratio.
The fund was among the top strategies in terms of returns over one, three and five years, and ranked top three for its Sharpe ratio over three and five years, according to eVestment. It also posted high information ratios over the same period, while maintaining a low level of tracking error.
All-told, it outperformed the MSCI Emerging Markets Index over a substantial margin amounting to more than 13 percentage points last year.
The vehicle seeks take advantage of the long term structural growth of emerging markets, which is propelling the consumer power of the middle class and helping generate more innovation. Its top holdings include consumer discretionary and financials, with over one-fifth of the portfolios allocated to China.
Dara White is the global head of emerging markets equites and is responsible for all aspects of the Columbia emerging markets equity strategies; he is supported by senior portfolio managers Robert Cameron, Young Kim, and Perry Vickery.
JAPAN EQUITY
Coupland Cardiff Asset Management
CC Japan Alpha Fund
Coupland Cardiff Asset Management’s CC Japan Alpha Fund netted our award in the Japan equity category for its outstanding performance and high Sharpe ratios.
According to eVestment, the fund ranked top two in terms of returns over one, three and five years. Its Sharpe ratio came first over three years, and was among the top three over five years. The vehicle also outperformed the Topix Total Return Index by a considerable margin last year, and has largely done so over the years.
Seeking to provide investors with long term capital appreciation through an actively managed Japan equities portfolio, the strategy focuses mostly on the services sector, followed by retail trade and the information and communications industry. It doesn’t have any exposure to globally exposed and cyclical sectors, which contributed partly to its strong performance and consistent returns. It typically aims to invest in between 25 and 40 stocks.
The lead fund manager of the strategy is Jonathan Dobson, who has been with the firm since 2006. Prior to joining Coupland Cardiff Asset Management, he was managing director at JP Morgan Fleming Asset Management.
ASIA EX-JAPAN EQUITY
Morgan Stanley Investment Management
The Morgan Stanley Investment Funds Asia Opportunity Fund
The Morgan Stanley Investment Funds Asia Opportunity Fund earned the award in the Asia ex-Japan equity category chiefly for its exceptional performance and high Sharpe ratio.
The vehicle ranked top for its returns over one and three years; it also ranked top for its Sharpe ratio over three years. In addition, its outstanding returns were contributed partly by a high information ratio, which ranked top as well. Last year, it outperformed the MSCI All Country Asia ex Japan Index by a large margin.
The strategy seeks long-term capital appreciation by investing in high quality established and emerging companies that are undervalued in Asia (excluding Japan), identifying companies with sustainable competitive advantages and growth based on fundamental analysis. The fund’s largest allocations go towards consumer discretionary and financials, followed by consumer staples and communication services. Close to 60% of its holdings are China-focused, with around 13% in India and around 8% in Taiwan.
Kristian Heugh has been the lead manager of the strategy since its inception in March 2016. Krace Zhou and Anil Agarwal were appointed as co-portfolio managers in September 2016 and April 2020, respectively.
CHINA A-SHARES
Allianz Global Investors
Allianz China A-Shares
The Allianz China A-Shares strategy is our pick as the obvious performer for the China A-shares investing, thanks to its outstanding and consistent risk-adjusted performance.
The vehicle boasted top returns over the past year, and it also produced high Sharpe ratio over three and five years. In addition, its information ratios over three and five years was among the top performers. Measuring against the MSCI China A Onshore Total Return Index, it gained a large level of alpha above its peers.
Seeking to provide broad-based exposure to the China A-shares market, the fund invests in a portfolio of around 50 stocks which encompass holdings across major sectors and subsectors of the market. The firm holds more than 1,000 company meetings each year, travelling where possible to make on-site visits at company operations. It adds around 20 to 25 new companies to the portfolio each year.
Anthony Wong has been looking after the fund since he joined the firm in 2012, while Sunny Chung became co-lead manager after he moved from the Taiwan team to Hong Kong in 2015.
REAL ESTATE INVESTMENT TRUSTS
American Century Investments
Global Real Estate Securities
American Century Investments’ Global Real Estate Securities fund impressed with its risk-adjusted returns last year, earning our award in the real estate investment trusts (Reit) category.
According to eVestment, the vehicle ranked top three for returns over one, three and five years; its Sharpe ratio was also among the top over three and five years. Comparing against the FTSE EPRA Nareit Global Index, the strategy generated a considerable level of excess returns.
Portfolio managers Steven Brown and Steven Rodriguez combine a mixture of top-down analysis of geographies and property sectors with bottom-up security evaluation of real estate companies, to try and spot likely instruments that will outperform a variety of market environments.
The American Century team follows a universe of 300 companies, including Reits and real estate corporates. The portfolio typically holds between 60 and 80 names, and is diversified by regions, which primarily include the UK, Europe, Africa, Middle East and Asia Pacific ex-Japan.
SMART BETA
Morgan Stanley Investment Management
Applied US Core Equity Strategy
Morgan Stanley Investment Management’s Applied US Core Equity Strategy can point to multi-year returns and a robust Sharpe ratio for its success in our smart beta category.
The vehicle recorded the second highest returns last year, while its Sharpe ratio ranked top three over three years, according to eVestment. The fund outperformed the S&P 500 Index by a large margin; the benchmark itself already posted stellar returns last year as it gained close to 28% as of December's end.
Seeking to generate consistent performance over the long-term, the fund stands by various investing and analysis tactics. It factors leadership in markets changes over time, and aims to understand the compatibility of different stocks. It also creates additional value through stock analysis that focuses on identifying key variables that drive changes in stock prices. Its top holdings range from information technology, financials to consumer discretionary.
The strategy is led by Andrew Slimmon, who has been with the firm for 28 years. He is supported by portfolio manager Phillip Kim, portfolio specialist Leslie Delany and portfolio analysts Roberto Fatta, Steven Tittsworth and Hannah Garriga.