Aberdeen Standard Investments (ASI) will launch a fund focused on China A-shares for UK investors in August - subject to regulatory approval.
The ASI China A-Share Equity fund aims to generate growth over a five year horion investing in onshore Chinese companies with A-share listings; this universe counts some 3,500 listed companies. ASI said increasing foreign ownership of such shares should "help improve corporate governance standards", while the market itself is less correlated to global markets and predicted to offer strong earnings growth compared globally.
The fund's portfolio will mirror the existing Aberdeen Standard Sicav 1 China A Share Equity fund, which is domiciled in Luxembourg and has achieved $2.6bn AUM since launch in 2015. A team of 24 manages the Sicav - based in Hong Kong, Shanghai and Singapore - and they will also manage the UK fund, using the same active approach based on fundamental research. ESG is used along with corporate engagement to enhance returns, ASI noted.
Nicholas Yeo, head of Equities - China at ASI, said: "China is the world's second-largest economy, one that is set to overtake that of the US within a generation. It has created wealth and enriched its people in an unprecedented manner."
"Investing in A-shares is one way of accessing the kind of companies that form the backbone of that growth and Chinese authorities are actively encouraging foreign investment. But investing is not without its challenges. Corporate governance standards are improving but still relatively low and the A-shares market can be extremely volatile. The approach we've taken to these challenges is to focus on company fundamentals and not simply buy into the generic trend of China's growth, and this has really paid off in recent years."
Alex Hoctor-Duncan, global head of Sales at ASI, said: "The launch of the fund will allow UK-based investors to access a relatively young, exciting market which has seen increased exposure within mainstream global indices. China A-shares are certainly not for the faint hearted but from a long-term perspective, in our view they could offer attractive opportunities."
ASI added that an "I" share class will be available when the UK fund launches, with an annual management charge of 1% and minimum investment of £1m.