HEAD-TO-HEAD: Invesco vs JP Morgan

Added 18th December 2015

Fund Selector Asia compares the Invesco Greater China Equity Fund with the JP Morgan Greater China Fund.

HEAD-TO-HEAD: Invesco vs JP Morgan

As the Chinese government moves ahead with its implementation of a series of reforms aimed at economic restructuring, new industries such as services and healthcare start to take on a more prominent role in contributing to the country’s growth.

Data from the National Bureau of Statistics show that China’s official non-manufacturing purchasers manufacturing index (PMI) hit a four-month high, rising to 53.6 in November from 53.1 in October.

At the same time, the country’s official PMI, which measures manufacturing, fell to 49.6, the lowest level in three years.

Industry sources noted that while traditional manufacturing and raw material industries are grappling with overcapacity, the country’s consumer sectors, such as those in e-commerce and telecommunications, are expanding rapidly.

As China’s economic transition to a consumption-based economy gathers momentum, Fund Selector Asia compares the Invesco Greater China Equity Fund to the JP Morgan Greater China Fund.

Luke Ng, senior vice president of research at FE Advisory Asia provides a comparative analysis.

Investment strategy review 

While both funds use the MSCI Golden Dragon Index Total Return as their benchmark, they have significantly different investment strategies.

The Invesco fund, led by Mike Shiao, focuses on companies with a competitive edge backed by strong management. Predictable earnings growth and sustainable leadership structures are factors that Shiao favours. These companies are referred to as “core quality” businesses and they make up 70%-80% of the fund’s holdings and are typically held for the long term.

Ng noted that Shiao’s portfolio is skewed towards private companies.

“One of the main characteristics of the Invesco fund is its portfolio manager, Shiao, has quite a strong bias against state owned enterprises (SOEs). In terms of margins and returns on investments, Shiao thinks that private companies present themselves as a better prospect,” Ng told Fund Selector Asia.

The Invesco fund is currently overweight on the consumer discretionary, information technology and consumer staples sectors.

Shiao typically maintains a concentrated portfolio of 40-60 holdings.

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