Experienced team on the ground gives an edge

Refinitiv Lipper Fund Awards 2020

Best Group over 3 years: EQUITY

Despite a widespread lockdown in the first quarter of this year because of the Covid-19 outbreak, wholesale prices of baijiu, the premium white liquor popularly used by businessmen for toasts and as gifts, have held up throughout the outbreak.

From the perspective of fund managers and analysts at UBS Asset Management, this is an indication that “premiumisation” — the demand by Chinese consumers for high-end, high-quality goods — remains intact.Other trends observed by the UBS team include the growing shift of businesses and activities in China from offline to online. During the lockdown, top online education companies have seen a huge increase in downloads, as have online gaming. Naturally, the better online players are in a good position to grab market share not just from the offline players, but also their other online competitors.

“Our China equities team remains cautious on the outlook for markets, but we’d remind investors that the outbreak is accelerating a series of trends in China,” says Sherry Wong, head of asset management Singapore & SEA and head of products APAC at UBS.

And it will not hurt investors to listen.

Sherry Wong, head of asset management Singapore & SEA and head of products APAC at UBS

The China equities team is the reason why UBS Asset Management picked up the Best Group over 3 years — Equity award at this year’s Refinitiv Lipper Fund Awards.

Bin Shi, UBS Asset Management’s head of China equities, has 25 years of experience in investing. He is backed by a strong, cohesive team with 16 years of experience on average — on either China or Hong Kong. Under Bin, UBS Asset Management’s flagship offshore China Opportunities portfolio is today a US$10 billion ($14.3 billion) fund with investors from all over the world.

According to Wong, having a strong and experienced team is not the only reason for UBS Asset Management’s success. The team sticks to a very clear investment philosophy, which in turn provides the framework from which investment decisions are made.

For example, the team makes the effort to go on the ground to speak with not just the management of companies they invest in, but also the competitors. They stick to high-quality companies run by strong management teams and even if they are already doing well, they are seen to have the potential to do even better in the future, says Wong.In addition, the team are “high-conviction” investors. “They believe it is better to take meaningful stakes in stocks you understand well than to spread out your bets too thinly. If the names in our portfolios are too widespread, the return potential will be diluted,” reasons Wong.

Despite the support passive investment has, the size, the vibrancy, and the potential of China mean there are rich opportunities for active strategies to suss out the gems and outperform, says Wong.

Specifically, China’s onshore stock markets are characterised as volatile, having varying disclosure standards, while fuelling the growth of fast-growing industries that are upending established players with new business models.

“This environment creates a great opportunity for active investors to exploit periods of mispricing, gain an edge through on-the-ground research, and spot high-quality companies in emerging industries,” says Wong.