MILAN, Oct. 26 (Class Editori) - Dawid Krige- manager of Greater China Equity of Banor Capital-, is among the most brilliant money managers on the Chinese stock market. Since January 2013, when he began to manage the fund, he produced a net yield by 224% (class S in dollars) compared to +91% of the market index (MSCI Golden Dragon Index), with an average annual performance of 16.3%, almost twice of the index (8.7%).
It is not easy to find a money manager who, for years, has been successful in beating the benchmark. In the first nine months of this year, the fund (which owns assets for $325 million) has reached +33%, almost three times more than the index (12.3%). His strategy? A concentrated portfolio based on the direct analysis of the bonds he invests in. Krige, indeed, travels between London and Shanghai, where MF- Milano Finanza has reached him in order to understand which are the topics that will lead the bond market in the Asian area after the growth of this year (the Shenzhen Stock Exchange has upsurged by 17% and the Shanghai one by 9%), thanks to the best recovery after the healthcare emergency due to the Coronavirus epidemic, which started right from here.
Greater China is part of the category of alternative funds, as it has both short and long positions: therefore, it is not part of the ranks regarding China shareholders. Krige, indeed, works for Cederberg, a hedge fund to which Banor has entrusted the consultation for its fund management. However, it is not a hedge, it has daily liquidity and a minimum access threshold of €1,000. Banor is an independent asset management company (which includes Banor Capital, UK-based and Banor Sim, based in Italy), founded by Italian financial professionals who have been working in team for over 20 years (the founder and majority shareholder is Massimiliano Cagliero, from Turin, born in 1969, he studied at Bocconi University and previously worked at Goldman Sachs which, in 1999, detected Banor Sim with a group of private investors).
Q. Which is your goal?
A. Gaining double digit profits with a 10-year perspective, by investing in high-quality companies based inside the so-called Greater China area. The fund aims at providing investors with an exposure to the area with the fastest growth rate worldwide and to some among the best global companies, by focusing on fundamentals and field research, through a Shanghai based analysts’ team.
Q. In which Stock Exchanges do you invest?
A. We invest in companies headquartered in China, Hong Kong, Taiwan, regardless where they are listed. The majority of fund shareholdings are Chinese companies listed on Hong Kong with a 37% and another 37% in the USA. In addition, the fund has an exposure to the companies listed on the domestic market, the so-called “A-shares” with 18%. We are talking about a possible investing universe of about 6,000 names, among which we choose the 150 bonds that we consider of greater interest.
D. How do you manage the fund?
A. With a long-term perspective by focusing on a small subgroup of quality companies, of which we have been holding the bonds for a long time. The questions we ask ourselves before investing are two: how much sure we are that the company will exist within ten years and if its value will significantly increase. We prefer to invest in the domestic consumption field, in sectors such as internet, healthcare, niche financial securities. Many investors still do not know China. The assessment gap between the Chinese leaders in the consumption sector and their Western counterparts is still huge, even though it is decreasing.
Q. How did you manage to beat the benchmark?
A. As I said, we focus on companies which are domestic growth-driven, a trend which will go on for years. The fund is Chinese consumer-oriented through investments in restaurants, food and spirits’ producers, education. It is also significantly e-commerce companies-oriented, such as Alibaba and Meituan, and videogames companies, such as Tencent and NetEase. These groups have achieved really good results and we expect them to have a brilliant future. We are proud of our due diligence, which has helped us to avoid many frauds some colleagues have incurred into. Once assessed that a particular company does exist and is managed honestly, we assess the business culture. We have noticed it is one of the best elements in order to evaluate the possibility of a company to be successful. A culture based on respect, work, moral integrity helps managers to hire the best people, by allowing a better governance in the whole company.
Q. Which securities will grow more?
A. We believe that the domestic consumption, healthcare and internet sectors can offer great opportunities in the long term. In these sectors, we prefer leading companies, as strong companies often have the inclination to become even stronger. This is particularly significant in a post-COVID-19 world. Consumers love internet giants, which offer integrated solutions. Also the Chinese government is acting favorably, as it understands the key role played by these companies in knowing and, somehow, better controlling the population. Coronavirus in China has been defeated by far also thanks to a strict traceability system, which was made possible thanks to the technology provided by consumption services’ platforms.
Q. How is the situation in the country after the pandemic?
A. Life in China has come back to a pre-COVID-19 phase. Retail sales have even increased by 5% on annual basis in the recent holiday period of the Golden Week. Chinese people are resilient and disciplined. Local lockdown measures have worked and have allowed the rest of the country to quickly come back to normal.
Q. Which lesson have you learned from COVID-19?
A. The strongest ones are always those who survive; therefore, crises make strong companies even stronger. The post-Coronavirus Chinese government relies increasingly more on internet giants because they are providing tools and data to control and contain the virus.
Q: Why investing in Chinese stocks?
A. Chinese stocks offer rare opportunities in a world where the most asset classes have the right price or are too expansive. Moreover, global investors tend to make less than 5% of investments in this region; however, its weighting in the global indexes can increase up to 30% or more in the future. Lastly, there will be a new assessment concerning the idea of risk in the country. However, this asset class is suitable only to investors with a long-time span, because it can be volatile: in the last 25 years, Chinese stocks have fallen by more than 50% three times. (All rights reserved)
(Source:Class Editori)
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