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. They all have strong convictions and an ability to make good decisions.
Our list comprises three managers of public mutual funds 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 markets 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 ($201.5 billion).
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 sixth private markets manager to make our list, Yang Ling of StarRock Investment Management.
Yang Ling, Chief strategist, CEO, StarRock Investment Management
The second of two women on our top 10 list, Yang Ling works as a partner of Beijing-based private funds firm StarRock, which launched in 2007.
Founded by former mutual fund managers, StarRock now has a 40-strong investment and research team and manages Rmb20 billion – among China’s top 10 private securities firms by assets, according to Gesafe.
It seeks to calculate entire portfolio risk via four steps: it conducts macro analysis to identify mid- to long-term trends; it gauges which sectors are best-placed, adopting a bias towards cyclical, tech, defensive and consumption stocks; sector(s) chosen, it builds a pool of stocks based on fundamentals; and it employs a risk control overlay.
An absolute return investor, Yang follows this model. “China’s A-shares market is an emerging market where a lot opportunities come from asymmetric risk and return,” Yang said.
The strategy she launched in 2007, StarRock Product 1, is long-only and doesn’t incorporate hedging instruments. It has generated a cumulative 207% since inception to August 20, while year-to-date it has generated an absolute return of 45%, versus 11% for the CSI300.
It was in 2008 when the global financial crisis erupted that Yang and her team bolstered their reputation: their funds generated an average 4% return even as the CSI300 index slumped -66%.
Overall the firm manages 40 products that adopt a similar long-only approach, generating an average 52% return in the first half of 2015, by Gesafe data.
Even amid the A-share fallout, Yang shares the sunny disposition of domestic managers. “The first half of this bull market was driven by liquidity, but the second half will be driven by reforms, which benefit company fundamentals,” she said.