AsianInvestor’s 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 organisations of the previous 12 months.
The winners of these categories must combine a mixture of business performance, growth and progress, measured on both quantitative and qualitative criteria. Below, we detail why we chose this year's winners of the second half of our asset class award categories, which comprise the leading funds across a set of investment concentrations.
These awards were chosen through a combination of quantitative analysis of investment performance and risk-taking across one, three and five years, based on information from Mercer and eVestment, and then qualitative consideration of how teams of fund managers sought to outperform. Please click here to read about the fund winners in the first half of our asset class awards.
GLOBAL EQUITY
FIDELITY INTERNATIONAL
FIDELITY GLOBAL TECHNOLOGY FUND
Fidelity International’s Global Technology Fund won our global equity category award chiefly for its impressive and consistent performance.
According to eVestment, the fund ranked top for both its Sharpe ratio and overall returns with low standard deviation over three and five years. Measured against the MSCI ACWI Information Technology Index, the fund has outperformed the benchmark in 2018 by a large margin compared to its rivals.
The strategy chiefly invests in equity securities globally that develop products, processes or services benefited by the technological trends. Several factors are considered in the team’s selection approach, including a company’s financials, company management, and the industry and economic environment.
Unsurprisingly given its focus, it invests heavily into leading tech stocks such as Apple, Samsung Electronics and Google’s parent company, Alphabet. This also means that most of its stock exposure is concentrated in the US, but it also has geographic holdings in South Korea, Japan and Germany, among others, according to its factsheet.
Established in September 1999, the fund is led by Hyunho Sohn, who has been heading its strategy since March 2013.
EMERGING MARKET EQUITY
SCHRODER INVESTMENT MANAGEMENT
SCHRODER INTERNATIONAL SELECTION FUND (ISF) EMERGING ASIA
The Schroder International Selection Fund (ISF) Emerging Asia stood out from rivals to scoop our emerging market equity award this year.
According to eVestment, the strategy posted the highest overall returns and Sharpe ratio with low standard deviation over three and five years. It outperformed the MSCI Emerging Markets Asia benchmark last year and offered better returns than all its peers.
Incepted in January 2004, the fund is managed by Louisa Lo, who has over 15 years of experiences in managing funds. She and her colleagues seek to identify and invest into structural growth trends in emerging Asia, such as favourable demographics, consumption upgrade and surging infrastructure demand.
The fund allocates predominantly to China B-shares and China H-shares. It can also seek to manage its risk by utilising derivatives. Its holdings are spread across the information technology, financials and consumer discretionary sectors, but as it invests it takes a host of risks into considerations, such as China country risks, currency risks and derivatives risks, according to the factsheet.
CHINESE DOMESTIC FIXED INCOME
ALLIANZ GLOBAL INVESTORS
ALLIANZ RENMINBI FIXED INCOME
Allianz’s Renminbi Fixed Income fund has done a good job for risk-adjusted returns in a market in which the concept of risk is swiftly rising, as defaults and restructurings begin.
According to Mercer, the fund's Sharpe ratio stood above all direct rivals over over three years, while it was in the top five over over five years. It also outperformed the Markit iBoxx ALBI China Offshore index by a reasonable margin in 2018.
The fund has now been operating for eight years. Its investment strategy is to generate long-term capital growth and navigate renminbi interest rates strategies by actively identifying and then investing into instruments that stand to benefit from macroeconomic trends.
To do this the fund's investment team conducts fundamental credit analysis to identify undervalued bonds from companies with robust business models, sound financials and strong, stable cash flows. Meanwhile, the team employ prudent risk controls to manage market and credit risks, according to the fund factsheet.
In practice, the fund's top holdings are Chinese government bonds. However, almost 90% of its assets were ranked 'A', as it seeks to benefit from the sweet spot of both quality and some level of performance.
CHINA A-SHARES
UBS ASSET MANAGEMENT
UBS ASSET MANAGEMENT CHINA A OPPORTUNITY
The China A Opportunity fund of UBS Asset Management was an easy choice for the China A-shares category, given its combination of outstanding returns and consistent performance.
According to Mercer, the fund ranked top for its overall returns, Sharpe ratio and information ratio over three years with low standard deviation. It also stood in the the top three funds for its Sharpe ratio over the 2018 too.
Its strength of performance may well come down to the veterans that manage the fund. Geoffrey Wong, head of global emerging markets and Asia Pacific equities, leads the Asian equity team while Bin Shi, head of Chinese equities and managing director co-heads the strategy. Wong and Shi have had 30 years and 24 years of experience, respectively.
Their approach is to conduct bottom-up proprietary research that focuses on the best leading companies to offer long-term growth, the firm said. The benchmark-agnostic approach means that, while the fund might deviate from indexes, it can buy into company shares in some industries that are not adequately represented in China.
The fund invests via QFII and RQFII, which potentially creates risks of delays in fund transfers into the onshore market. But the investment team overcome that by being flexible and investing partially offshore instruments, the firm said.
REAL ESTATE INVESTMENT TRUSTS
COHEN & STEERS
COHEN & STEERS GLOBAL REALTY FOCUS
Cohen & Steers' ability to post consistent outstanding results over several years with its global realty focus fund earns our real estate investment trusts (Reit) award this year.
According to Mercer, the fund produced the best return and reward/risk ratio over one and three years. It was ranked top three in information ratio and has performed consistently with low standard deviations, based on Mercer’s data.
Equity enchmarks plummeted across the board at the end of last year, including for Reits. Yet this fund outperformed both S&P Global REIT and FTSE EPRA Nareit Developed Index by a considerable margin.
The strategy, first established in January 2008, aims to deliver long-term returns with a relative-value investment approach to identify mispriced securities relative to their underlying assets and peers, the firm said.
The fund's investment team combine quantitative and qualitative factors to assess the management, asset quality and corporate governance of the Reits they target. In addition, they also pay a keen eye on the varying business models of real estate companies and what can be sizeable differences in country risk and monetary policies.
Jon Cheigh, a 14-year veteran of Cohen & Steers and its head of global real estate, leads the US firm’s Reit capability. He is assisted by eight other portfolio managers on the global real estate securities team.
SMART BETA
PANAGORA ASSET MANAGEMENT
DEFENSIVE US EQUITY LOW VOLATILITY
Smart beta is a relatively new investment category, and can encompass a lot of different investment types, depending on its geographic focus and preferred factors. But for this year we favoured the PanAgora Asset Management’s Defensive US Equity Low Volatility due to its ability to secure the highest overall results among smart beta rivals over three and five years, aven as it achieved a high Sharpe ratio with low standard deviation.
The strategy focuses on diversification to avoid risk concentration in any individual security or group of securities. However, in 2018 the fund had to cope with a market in which low volatility investing and diversification stood against indexes that were riven with risk concentrations.
To overcome that, the fund focused on reducing its exposure to these risk concentrations and then tried to capture opportunities when these concentrations dissipated. Judging by its performance, the team have a good track record in doing just that.
The fund relies on the collective expertise of its investment team, but Nicholas Alonso, director of the multi-asset team, is responsible for developing and managing PanAgora's defensive equity strategies.