Value Partners profit slumps on poor performance

Added 12th July 2016

Does Value Partners’ fund performance justify its tanking stock price, net profit and assets under management since the A-shares crash in the second half of last year?

Value Partners profit slumps on poor performance

The Hong Kong-listed fund house expects net profit for the first half of this year to reach a mere HK$5m ($645,000), 1% of its net profit the same period last year (HK$446m), it said in a profit warning statement to the local stock exchange last Friday.

Operating profit before other gains or losses, which reflects its core business, is estimated to further shrink to HK$110m in the first half, from HK$361.7m and HK$197.3m in the first half and the second half of 2015, respectively.

As reason for the decline, the firm said “most of the relevant funds under management did not surpass their previous high watermarks or benchmarks”, which led to “substantial reduction” in performance fees.

Performance fees are charged when the return of the funds exceeds the benchmarks or its peak level. Most funds’ performance fees are crystallised at the end of each year, it noted.

The firm's assets under management reached $13.3bn as of 31 May, down by 15% from the end of 2015 ($15.6bn), and the record high $17.8bn as of 30 June last year.

Its stock price fell 7.4% on Monday, dropping a total of 37.4% in the past 12 months.

FSA takes a look at its five mutual funds that invest in China or Greater China equities.

In terms of performance, in the 12 months ended 30 June, only one fund among the five - the Value Partners China A Share Select Fund (in US dollars) – was in the second quartile of the Hong Kong funds - China equities category, according to data from FE Analytics. This category has 86 funds in total.

It returned -24.5% during the period, outperforming the category’s average and its benchmark -- the CSI 300. The best performer in the same category is the BOCHK’s All Weather CNY Equity Fund (in US dollar), which returned -7.76%.

Within the same category, VP’s Chinese Mainland Focus (in US dollar) produced a return of -32%, placing it in the third quartile.



Separately, under the Hong Kong funds - Greater China equities sector, which comprises 59 funds, the Value Partners Classic Fund and the Value Partners China Greenchip Fund are in the third quartile, while the Value Partners China Convergence Fund (all in US dollar) stood in the fourth, based on the one-year performance ended 30 June.

They returned -24.8%, -28% and -31.6% during the period, respectively. The Invesco Greater China Equity Fund topped the category with -9.5% return. The category averaged -23.6%, according to FE.

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