Munro has now exited its exposure to China in its Global Growth fund over concerns about regulatory threats.
The firm had previously decided to halve its exposure to Tencent and Alibaba in February but had now decided to exit the positions altogether given regulatory threats.
Alibaba was the fund’s largest position in October 2020 at 7%, in anticipation of the ANT Financial initial public offering in November. The listing of the firm, which was the financial subsidiary of Alibaba, was later halted over regulatory concerns for scrutiny for internet finance. It also had 4.7% in Tencent.
However, by the end of 2020, both firms had dropped out of the fund’s largest top five holdings and it now held no exposure.
In a webcast, chief investment officer, Nick Griffin, said: “Regulatory threats are going through in China and that is concerning.
“Alibaba was our largest position, we were very excited about the Ant Financial IPO and we also held Tencent. But we put a stop loss in place in February where we monitored the stocks for 30 days and every time we looked at it, we couldn’t say what would happen.
“We are not saying we dislike China but we will stick to the sidelines for now.”
He said he was surprised to see that the regulatory threat to technology firms had ended up coming from China rather than regulation of Facebook.
The Munro Global Growth fund had returned 23.1% over one year to 30 June, 2021, according to FE Analytics, versus returns of 15.6% by the absolute return sector within the Australian Core Strategies universe.
Performance of Munro Global Growth versus sector over one year to 30 June 2021