London’s Heptagon Capital has partnered with third largest asset manager in China Harvest Global Investments to launch the Harvest China A Shares Equity Fund, the first Ucits fund vehicle to follow an actively managed strategy in the China A Shares equity market, which provides for daily liquidity under the RQFII programme.
Heptagon, a London based $9bn specialist asset management business, is launching the fund on its Irish Ucits platform, where Harvest has been appointed the sub-investment manager. The fund will aim to build on the success of Harvest’s ‘Research Select’ strategy, the equity portion of which has outperformed the CSI 300 index by 75% since inception in May 2008.
The Harvest portfolio managers employ a Growth At a Reasonable Price (‘GARP’) approach and focus on well-positioned companies, with superior growth and quality. This is a bottom-up stock picking strategy, with a long-term outlook based on company fundamentals which invests in a concentrated portfolio of high conviction stocks that trade in RMB. Unhedged USD, EUR and GBP share classes are to be offered by the fund.
The move follows recent measures taken by the Chinese government to open up the A-shares market to foreign investors, who currently hold 1% of it, according to Heptagon. So far the Chinese A-share market has been much harder to access for foreign investors compared with the H-share market, which trades on the Hong Kong Stock Exchange.
A-shares offer a higher exposure to the consumer services, consumer goods, health-care and industrials sectors than the H-share market, Heptagon partners explained.
Peng Choy, CEO at Harvest Global Investments in Hong Kong said: “Harvest was one of the first groups to receive RQFII (Renminbi Qualified Foreign Institutional Investor) status in 2011, and since then we have been at the vanguard of efforts to allow international investors to gain exposure to the economic opportunities in China and indeed the wider Asian markets, across all asset classes.
“Recently, we have pioneered the listing of ETF’s on various global exchanges, with exposure to the CSI 300 and the MSCI China A Index, and feel that this fund launch is a natural progression of these global efforts. We are now bringing our actively managed China A Share equity strategy to a wider geographical investor base through our sub-investment manager role for Heptagon’s Irish regulated Ucits fund vehicle. Heptagon’s differentiated approach to providing unique and difficult to access investment solutions to sophisticated investors makes us confident that they are the right partner to help us deliver our successful China A share investment approach to international investors.”
Commenting on the new fund, Fredrik Plyhr, founding partner, said: “The China A shares have a far higher weighting than the H shares to sectors like consumer services and consumer goods, which are obviously closely aligned to the often stated, but still very real, domestic consumption theme in China. With the Shanghai composite trading at the cheapest level on record, relative to the MSCI Emerging Markets Index, we feel that the timing of this pioneering product will prove opportune for our all stakeholders.”