AsianInvestor recently carried out on a project to identify the top 10 portfolio managers in China – those with star quality and a sprinkling of magic. You can find our rationale for this venture by clicking here.
We based our choices on a weighted set of criteria: long-term track record, market experience and applicability of strategy for a changing China. What unites them is an ability to find value, typically in sectors that will drive the mainland's future growth. These people have strong convictions and an ability to make good decisions.
Our list comprises three managers of public mutual funds and seven from the private markets side. The mutual fund managers needed a track record of at least five years to encompass both bull and bear cycles. All three on our list consistently ranked in the top 20% annualised over one, two, three and five years, including the recent market correction.
Here we profile the second public markets manager on our list, Peng Gan, chief investment officer at Baoying Fund Management.
Peng Gan, CIO, Baoying Fund Management
Based in Shenzhen, Peng Gan is a contrarian who seeks to cherry-pick stocks that have been neglected by the mainstream.
He prefers growth companies in internet-related segments and industrials that stand to benefit from China’s transition. Hence his top 10 holdings are littered with tech and industrial firms such as new material producers.
“My style is more focused on bottom-up selection than momentum-chasing,” Peng said. “Your belief is tested because China’s equity market has strong characteristics with a rapid-style rotation, particularly in a bull market.”
He relies on fundamental analysis using the research support he receives. At Baoying he manages five funds with a combined Rmb28.8 billion ($4.5 billion) as of end-June (only quarterly data is available).
The best known is Resources Selection, which he started running in October 2010. The fund has seen its AUM swell from Rmb100 million to Rmb10.3 billion as at end-June. It ranked second among 276 peers over five years with an annualised 23.8% and has generated a 36% absolute return in the first seven months of this year, by Morningstar data. It was up over 140% before the correction.
While Peng has seen many peers set up private firms, he retains belief in the development of the mutual fund industry.
“Most private managers are a one-man-band; only a few have established a strong research team to back their investments,” he said. “[Lack of support] is a restriction in the long run. I prefer the power of teamwork in the mutual fund industry.”