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 third private markets manager to make our list, Wang Ruyuan of Trend Capital.
Wang Ruyuan, chairman, Trend Capital
One of two women on our list, Wang Ruyuan sealed her reputation at Baoying Fund, generating a 53.4% return for her core mixed asset fund in 2013 against -7.6% for the CSI300.
This fund focused on the information technology and internet sectors, with a core invested in companies in which she held a high conviction on management quality and growth, while at the same time investing in satellite stocks that were more sentiment-driven.
Last November she exited public markets to set up Trend Capital, a five-strong boutique focused on China’s emerging industry stocks, particularly internet and TMT companies.
The firm employs a growth-biased, stock-picking style, with Wang launching 10 products in the first six months. Trend Capital’s AUM has passed Rmb5 billion. Its first fund, which raised Rmb1.6 billion on launch, has generated a 28% absolute return this year to July 24, finds Shenzhen-based private fund distributor JFZ.com.
Wang has forecast that technology evolution will pressurise the mutual fund industry, where firms must meet reporting and compliance requirements – making them less nimble and driving underperformance.
Wang is an outspoken advocate of stocks on ChiNext, China’s Nasdaq-style board in Shenzhen comprising 484 companies, despite its evident volatility. ChiNext hit a historic peak of 4,037 on June 5, a 162% rise for 2015. By August 21 it had dropped 38% to 2,508 points – still a 70% rise year-to-date.
Wang forecast a correction this March, but said her conviction in companies that stood to benefit from China’s economic transition would not change.
Media reported that one of her funds was under threat of liquidation as AsianInvestor went to press. But we featured her due to a demonstrable track record of performance and success.