AsianInvestor recently carried out 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 China’s future growth. These people have strong convictions and an ability to make good decisions.
Overall our list comprises three managers of public mutual-fund and seven on the private markets side.
Many private markets managers started life in the public arena, building a good track record before looking for greater investment flexibility and a better profit-share from higher management fees.
They argue the less onerous compliance requirements that come with working on the private market side gives them greater flexibility to execute. Many target undervalued stocks whose share prices stand to be driven by company restructures or turnarounds.
Private sunshine funds – China’s equivalent of hedge funds – have seen assets under management surge 161% this year to June to Rmb1.28 trillion.
Market-neutral strategies have enjoyed a boost in perception given the recent equity market swings, although few private securities managers engage hedging tools beyond index futures.
Managers are allowed to borrow and short-sell a select range of stocks, but are generally deterred by limited availability, regulatory scrutiny and cost.
Nevertheless, these managers merit recognition for seeking to develop more sophisticated strategies in a market with limited hedging tools.
Here we profile the second private markets manager to make our list, Qiu Guogen of Chongyang Investment Management.
Qiu Guogen, managing partner, chairman, CIO, Chongyang Investment Management
Among the first group of locals to establish a private investment firm, Qiu Guogen was making market bets before China’s mutual-fund industry was even born.
He has built a reputation for stable returns via a fundamentally driven, value-investing approach and is careful to avoid consensus.
Qiu started at Junan Securities in Shenzhen in 1993 and established Shanghai Chongyang Investment Company in 2001, managing segregated money until it launched Chongyang Product 1 in 2008.
This has generated an annualised return of 22% and a cumulative return of 288% since inception, versus a cumulative 74.8% for the CSI300 and a cumulative peer average of 150%.
Qiu’s team was under pressure in the first five months of this year, given a mean 6.95% return from the firm’s 16 products against 45% for CSI300, finds Howbuy.
But Chongyang’s products returned 26.6% during the market turbulence of June and July, demonstrating market-neutral capabilities by picking long-term value stocks (defensive) while shorting index futures.
In 2009 Qiu set up Chongyang Investment Management to launch sunshine private funds. It now it manages Rmb20 billion.