111 Active China A-Share Funds, AUM $55bn.
2022 Performance & Attribution Report
In this report, we provide an overview of 2022 performance among the China A-Share funds in our analysis. We look at annual performance broken down by Style and Market Cap focus, together with longer-term analysis of active versus passive. We then identify the drivers behind 2022 performance based on the average active China A-Share fund stock portfolio versus the iShares MSCI China A-Share ETF (CNYA).
China A-Share managers had a difficult 2022. Average returns of -30.08% fell short of the iShares MSCI China A-Share ETF by -3.89%, with more than 80% of funds underperforming. GARP funds stand out as the best performers and the only Style group to outperform the benchmark, on average.
The top and bottom performers on the year are listed below. GARP strategies are prominent among the top performers, led by First Sentier’s China A-Shares with -16.8% returns,
Time-Series Active v Passive
Active China A-share managers had a relatively benign 3rd and 4th quarter compared to benchmark, but big underperformance in February and November outgunned outperformance captured in January, October and December.
This is the 2nd consecutive year of underperformance from China A-Share managers, all but cancelling out strong outperformance in 2018, 2019 and 2020. 5 Year outperformance stands at +3.19%, on average.
5-Year Performance Summary
Contribution & Attribution Analysis
We now look at the drivers behind last year’s absolute and relative performance. We do this by creating a portfolio based on the average allocations of the 111 active strategies in our analysis. This theoretical portfolio, with no fees and based on monthly holding observations returned -26.8% on the year. On a sector level, -6.46% of this was driven by Technology holdings (ch1), -5.4%% by Industrials and -3.47% by Materials. Only Cash holdings provided a positive impact on the portfolio over the year. On a stock level, the major holdings in the portfolio dragged on returns, led by Contemporary Amperex Technology, Luxshare Precision and Kweichow Moutai.
To understand where last year’s underperformance came from, we measure the attributes of this portfolio versus a representation of the benchmark based on the iShares MSCI China A-Share ETF (CNYA). The active portfolio underperformed by -1.09% in 2022, driven by underweights in Financials and Energy, together with poor stock selection in Materials and Industrials (ch3). On a stock level, underweights in Shaanxi Coal Industry and Wuxi Lead Intelligent Equipment, together with overweights in GoerTek and Luxshare Precision were the key drivers of underperformance (ch4). Only Cash holdings, and minor overweights in Ningbo Orient Wires & Cables salvaged some outperformance for the portfolio in 2022.
For more analysis, data or information on active investor positioning, please get in touch with me on steven.holden@copleyfundresearch.com
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