Presenting the FSSA All China Fund
FOR PROFESSIONAL INVESTORS ONLY
In this Fund in Five, we speak to portfolio managers Helen Chen and Winston Ke about the fund from five angles to see how it has achieved this performance and how it looks past short-term noise.
Asset class
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Process
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Differentiator
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Team
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Track record
IMPORTANT INFORMATION
Launched in March 2017, the FSSA All China Fund has so far delivered on its stated aim of generating capital growth over the medium to long term.
“Some investment themes we like include rising consumer wealth, rising healthcare spending and increased research and development (R&D) in areas such as technology and pharmaceuticals,” she adds. “These are multi-year, if not decades-long, growth trends that we believe should support the long-term earnings of our holdings.”
NEXT
Given its near-term business and economic cycles are different to both the west and other major markets like Japan, Chen adds that China offers diversification benefits to global investors.
“There is a vast domestic market and a large group of driven entrepreneurs,” says Chen. “As the country develops, we see Chinese companies becoming more sophisticated in corporate and governance development.”
The FSSA All China Fund invests in the All China Universe, which comprises over 5,000 companies, including China A-shares, domestic companies listed onshore in Shenzhen and Shanghai, and offshore companies in Hong Kong.
“This is fairly concentrated, though we still aim to be sufficiently diversified to mitigate some of that risk,” says Chen. “As long-term, quality-focused investors, our portfolio holds companies which have good management, strong economic moats and a track record of growing earnings.”
The team hold more than 1,500 company meetings every year and of these Chinese companies comprise nearly one-third.
“We are purely research-driven, bottom-up investors, which means we focus on understanding individual companies and their fundamental growth drivers,” says Chen.
FSSA Investment Managers’ investment approach is centred on identifying quality companies, buying them at a sensible price and holding for the long term.
Following a watchlist of some 150 companies, the end portfolio holds between 40-60 stocks.
“We want to back owners and managers who are well aligned with minority investors, who care about the broader community and society, and have sustainable business models,” he says.
Source: FSSA Investment Managers, as at 31 May 2023
Launch
01 MAR ’17
£59M
Fund size
1.05%
OCF
While not classified as an ESG fund, in addition to frequent engagement with company management, Ke says it has integrated ESG factors into its investment process.
The fund is also benchmark agnostic, with the focus being on absolute performance. As conservative investors, Ke says the potential downside of any holding is considered just as much as the potential upside.
“This is our key differentiator as we can look past the short-term market noise and focus on a company’s long-term growth potential,” says Ke. “We believe this gives us an edge as we can take advantage of market volatility to add to our high-conviction holdings at cheaper valuations.”
While the focus of the portfolio is looking for companies it can hold for at least three to five years, often holdings are held for much longer.
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Current holdings
No investment strategy or risk management technique can guarantee returns or eliminate risks in any market environment. RWC Partners Limited is authorised and regulated by the Financial Conduct Authority.
“As a team we have been investing in China for 30 years now and have participated in the economy’s remarkable growth during this time,” says Ke. “The FSSA team also invest in the broader Asia Pacific markets including Asean, Greater China (which includes Taiwan) and India, as well as Japan and global emerging markets, so we benefit from having a wide range of perspectives and observations,” he says.
The FSSA investment team has around 20 investment professionals from a range of diverse backgrounds.
“It really is about the team rather than the individuals,” says Ke. “We don’t have sector or company assignments, so each person’s research focus can vary based on our individual interests and strengths.”
Ke has been involved with managing the FSSA All China Fund since launch in March 2017, with Chen being appointed as co-manager in July 2019.
Both focusing solely on Greater China equities, Ke joined FSSA in 2015 and has more than 16 years of investment experience, while Chen joined the group in 2012 and is lead manager of the FSSA China Focus and FSSA China All Cap strategies.
“Internet companies like Tencent and Meituan also added to performance, as well as consumer companies like China Mengniu Dairy and China Resources Beer,” he adds.
HOME
Since launch in March 2017 to end of April 2023, the FSSA All China Fund has generated a return of 51% in sterling terms, versus a -8% return for the MSCI China All Shares Index (also in sterling terms).
Over this period, Ke says that key performance contributors include companies such as Shanghai Liangxin, which makes electrical components, and Luxshare Precision, which makes cables and connectors.
*Source: Federated Hermes, Federated Hermes Global Emerging Markets Equity Fund as of 28 Feb 2023. Fund performance shown is valued at midday, the benchmark is valued at close of business. Performance shown is the F share class Sterling Accumulating net of all costs and management fees. Past performance is not a reliable indicator of future performance.
These figures refer to the past. Past performance is not a reliable indicator of future results. For investors based in countries with currencies other than GBP, the return may increase or decrease as a result of currency fluctuations. All performance data for the FSSA All China Fund Class B (Accumulation) GBP. Source for Fund - Lipper IM / First Sentier Investors (UK) Funds Limited. Performance data is calculated a net basis by deducting fees incurred at fund level (e.g. the management and administration fee) and other costs charged to the fund (e.g. transaction and custody costs), save that it does not take account of initial charges or switching fees (if any). Source for benchmark – MSCI. Fund and benchmark includes income reinvested net of withholding tax. Since inception performance figures have been calculated from 24 November 2017.
Performance as at 30 June 2023 (Class B shares, % GBP net of fees)
