What are we looking for?
How Greater China equity funds fared during the Chinese Year of the Tiger.
We ranked funds by the best returns since the Chinese New Year began last Feb. 14 to Jan. 27. The new Year of the Rabbit begins this Thursday. U.S. dollar and duplicate versions of the funds were excluded.
What did we find?
The tiger is symbolic of energy and power, but the top three funds were passive index mutual funds or exchange-traded funds.
Pro FTSE RAFI Hong Kong China Index, a mutual fund that tracks a fundamentally based index, rose to the top with a 26-per-cent gain. Its return was helped by conglomerates such as Hutchison Whampoa Ltd. and Swire Pacific Ltd. as well as casino operator SJM Holdings Ltd.
Unlike market-capitalization indexes, the companies in this index are weighted by factors such as cash flow, sales and cash dividends over the past five years. "It's a more value-oriented play," and can stand more volatility, said Stuart McKinnon, chief executive officer of Pro-Financial Asset Management Inc. "If we have a market correction, these companies are blue chip companies that tend to withstand the downside better."
BMO China Equity Hedged ETF, which tracks an index of U.S.-listed American depositary receipts (ADRs) representing shares in China-focused companies, climbed 18.6 per cent. And PowerShares Golden Dragon China Class, a mutual fund which tracks an index comprising U.S.-listed securities that get most of their revenue from China, rose 17.7 per cent.
Stocks that helped to drive the BMO China ETF included names such as Chinese search engine Baidu Inc., semi-conductor firm Spreadtrum Communications Inc. and oil and gas producer CNOOC Ltd. "Because we used ADRs, our index tends to be made up of blue chip companies," said Kevin Gopaul, chief investment officer of BMO ETFs at Bank of Montreal.
Sentry China Fund, which converted to a mutual fund from a closed-end fund last year and has lagged its peers with a 3.7-per-cent gain, is throwing in the towel. This fund, which charges a 3.5-per-cent fee, will close around March 25 because its small size makes it "difficult to economically fulfill the fund's mandate," Sentry Investments said.
The fund raised $86-million when it went public in 2007, but its last reported assets were $18-million. It looks like the ones who really made money were those who sold it.