Money
China's nimble funds top 2010 equity ranking: Lipper
(Agencies)
Updated: 2011-01-07 15:35
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SHANGHAI - China's bond and overseas investment funds outperformed domestic equity funds in volatile markets in 2010, while several small and nimble fund houses beat their bigger rivals, data from Thomson Reuters Lipper showed.
Smaller Huashang Fund Management Co took advantage of the harsh investment environment to beat larger ones such as China Asset Management Co (China AMC) in performance ranking.
The trend of diverging fund performance is likely to continue as asset managers compete fiercely to woo investors in a fund boom that may help boost China's mutual funds industry by 20 percent this year to 3 trillion yuan ($450 billion), fund consultancy Z-Ben Advisors forecast.
"2010 gave China's smallest fund companies the hope that they can quickly boost market share as long as they can deliver shining performance," said Z-Ben analyst Zhang Haochuan.
"The biggest players will continue to grow by leveraging their strong brand awareness, but increasing competition will leave those medium-sized, mediocre fund houses struggling to survive."
Huashang dethroned market leader China AMC in the 2010 China equity funds ranking, with its Huashang Prosperous Epoch Growth Fund posting a stellar 37.8 percent annual return.
The performance contrasts with the 14.4 percent drop in the benchmark Shanghai Composite Index last year, helping boost Huashang's size fivefold in 2010.
Underscoring a yawning performance gap in an industry which once had the reputation of offering identical products, worst performer Baoying Pan-Coastal Region Growth Fund recorded an investment loss of 24 percent.
Overall, Chinese equity funds generated an average return of 3.3 percent in 2010, less than the 7.1 percent for bond funds and 3.6 percent for overseas investment funds under China's Qualified Domestic Institutional Investor (QDII) program, Lipper said.
Index funds were the worst performers, posting a loss of 12.4 percent.
"Such a result may help fund managers to persuade investors to diversify their portfolios and that may benefit marketing of QDII funds this year," said Z-Ben analyst Daisy Yuan.
Small vs big
Eight out of China's top 10 best-performing equity funds last year were launched by houses with less than 2 percent market share, including the Chinese fund ventures of Colonial First State Group, Manulife Financial and Morgan Stanley.Galaxy Sector Selected Stock fund ranked second with a 30.6 percent return, followed by China AMC GARP Fund with a 24 percent return.
"Smaller funds often have an advantage over mammoth ones in volatile markets because they're more nimble and can swiftly expose themselves heavily to smaller stocks," said Z-Ben's Yuan.
Toward the end of 2009, Sun slashed holdings in cyclical sectors such as banking and property, and boosted exposure to consumer and other stocks that were likely to benefit from Beijing's support toward domestic consumption and innovation, Huashang's quarterly fund reports show.
Huashang Prosperous put nearly one tenth of the fund's assets in power equipment maker NARI Technology Development by the end of September last year, betting the company would benefit from China's plan to upgrade the country's power systems.
The fund is also heavily exposed to consumer-related stocks, including retailer Dashang and drug maker Zhejiang Hisun Pharmaceutical Co.
Stellar performance quickly boosted Huashang's reputation and market share, with its assets under management (AUM) growing fivefold last year to 12.3 billion yuan.
However, that is still tiny compared with more than 220 billion yuan managed by China AMC, the biggest player with a nearly 10 percent market share.