Money managers are launching stand-alone China A-share strategies or adapting existing approaches to accommodate strong interest they see from institutional investors.
Managers with established A-share strategies are highlighting their experience and winning business, while global equity and emerging markets equity specialists are leveraging existing expertise to launch dedicated China A-share strategies or broaden exposure to the market within separate accounts in response to investor interest, industry watchers said.
Because index provider MSCI Inc. added a 5% weighting to large-cap China A shares in its emerging markets and other indexes this summer, "people will have to invest in A shares whether they like it or not. MSCI has brought the issue to the table," said Aaron Costello, managing director and head of Cambridge Associate LLC's Beijing office, in a telephone interview.
Money managers and consultants report that investment in China is at the forefront of nearly every recent conversation they have had with investment officers from endowments, foundations, pension funds, sovereign wealth funds and family offices.
"Everyone is thinking about China right now. It's the drumbeat of conversations with investors," said Shanta Puchtler, CEO and president of Man Numeric, Boston. The quantitative manager, which managed a total of $34.7 billion as of Sept. 30, launched its first actively managed China A-share strategy in September.
Among other active managers that already launched or soon will offer stand-alone A-share strategies are Acadian Asset Management LLC, PanAgora Asset Management Inc. and Robeco Institutional Asset Management BV.
Investment in China A shares for institutional, family office and retail investors represents a lucrative new opportunity for both fundamental and quantitative active managers struggling to find returns in the U.S. and other developed country markets, sources said.
China A shares are attractive to active managers because their valuations are so much lower than equities in many developed markets.
Firms that have run A-share strategies for some time "have added a lot of value with some amazing returns — 500 to 1,000 basis points annually. There aren't many managers with long track records, but they are pretty compelling," said Cambridge's Mr. Costello.