Insto investors seek dedicated China exposure

29 June 2020

Institutional investors are increasingly investing in dedicated China funds rather than just via broader global emerging market strategies.

Research by bfinance found onshore A-shares funds and All-Shares funds, which blend offshore and onshore exposure, were becoming increasingly used.

This was the result of rising awareness of the different markets, the longer track records of A-shares funds and the performance divergence between China and GEM markets, particularly during the recent market turmoil.

The MSCI EM index lost 23.6% in the first quarter of 2020 while the MSCI China A index lost just 9.7%.

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There were more than 60 A-shares funds, of which 40 now had track records longer than three years. In the All-Shares space, there were less than 20 but managers were indicating they were willing to offer this type of strategy if there was client demand.

Weichen Ding, senior associate at bfinance, said: “It is increasingly untenable to remain on the sidelines of the world’s second largest equity market. More investors are beginning to take a strategic approach, as one might traditionally do with markets such as Japan, Europe and the US. Investors examining this space at the moment will encounter a landscape of products and strategies that has changed a great deal during the last five years.”

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