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September 14, 2015

Monday Morning Memo: China Funds and Black Monday

by Jake Moeller.

Lipper’s Jake Moeller examines the performance of China-themed funds during Black Monday week.

Most investors will have been familiar with the compelling thematic stories about China for many years: population, infrastructure growth, urbanisation, etc. Until 2011 all the China funds available in the market were equity funds. Today, there are nearly 100 UCITs funds (and considerably more share classes) with a China focus available in Europe. They cover not only equities; funds can be found specialising in emerging-market bond, mixed-asset, currency, and money market sector classifications.

If we accept that mutual fund production reflects investor sentiment, we can illustrate the successful pervasion of the China story. In 2015 up to June we have seen 13 new major China fund launches in Europe (it will be interesting to see how many funds are launched in the second half of the year!). Indeed, nearly 50% of all the China-themed UCITs vehicles have been launched since 2010, with total assets under management for all of these funds increasing  from €19 billion in 2010 to some €28 billion today–an increase of 47%. But as a whole, these figures represent a very small proportion of the overall UCITs market.

Table 1. Performance of Top and Bottom Five China Themed Funds Ranked by 1 Week to August 27, 2015 (% in Euro)

pic_chinabill

Source: Lipper for Investment Management

The variation of returns among China-themed funds during the Black Monday event was considerable and almost exclusively negative–only two funds returned a positive figure for the seven-day period ending 27 August 2015 (Prescient China Conservative E [Hedged] USD, up 1.62%, and Amundi Eureka Cina 2015, up 0.29%). Casualties at the other end saw losses over the same period of up to 18.2%. Some big name losers over the period included AllianzGI’s China A-Shares,  which fell 13.8%; BNP Paribas Investment Partners’ Flexi I CSI 300 Index, which returned  minus 15.5%; andKBC Horizon China, returning minus 17.3%. The overall average return during this seven-day period was minus 5%.

It is an unusual practice and possibly unwise to spend too much time examining such short-term performance–especially in collective investment vehicles, but the overall volatility of some of these examples was breathtaking in isolation. Let’s not forget, though, that over that same short period the Investment Association UK All Companies sector, for example, also returned minus 5%–a figure comparable to the average return of the China fund. Similarly, the IA North America Sector returned -5.6% over the same period.

Consider also some longer-term performance. Taking the one-year period to 27 August, there were some fairly impressive returns even with the Black Monday correction. KBC Horizon China, so maligned in our seven-day analysis, returned 57% over this period; Allianz China A-Shares (USD), 69%; and the average of all the funds was a fairly robust 10%.

 


Lipper delivers data on more than 265,000 collective investments in 61 countries. Find out more.

Disclaimer: 
This material is provided for as market commentary and for educational purposes only and does not constitute investment research or advice. Refinitiv cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice. The author does not own shares in this investment.

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