What are we looking for?
A look across the 24 equity fund categories for Canadian-domiciled fund managers on a year-to-date basis revealed to me that during the pandemic – especially at the point when markets got hit hardest – one category of funds has stood out as having lost the least amount of value: Greater China equity.
Today we look at top performers in this category among Canadian-domiciled mutual funds.
Measured on a year to-date basis, the maximum drawdown (the value lost from the peak portfolio value to the trough, before recovering) on average for Greater China equity funds was 13.5 per cent, compared with a drawdown 32.3 per cent for Canadian equity funds and 27.9 per cent on U.S. equity funds.
For most retail investors, investing directly in Chinese equities (aside from megacap stocks such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd.) might pose a challenge in terms of information and access, especially if a stock does not have an American depositary receipt (ADR) that trades on a U.S. exchange. In this instance, hiring a fund manager to do so might be a viable option should you wish to gain explicit exposure to this region.
To help with this search, I used Morningstar Direct to find Greater China equity funds that have performed well relative to others in the category and hence have a Morningstar Rating Overall of four stars or more. Recall that the Morningstar Rating Overall, commonly known as the star rating, is a historical comparison of after-fee risk adjusted returns against funds in the same category. A fund must have three full years of history before receiving a rating.
Only the oldest share class of each fund was considered in this analysis and funds reserved for institutional investors were excluded.
More about Morningstar
Morningstar Research Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. Morningstar offers an extensive line of products and services for individual investors, financial advisers, asset managers, retirement plan providers and sponsors, and institutional investors. Morningstar Direct is the firm’s multi-asset analysis platform built for asset management and financial services professionals. Morningstar Canada on Twitter: @MorningstarCDN.
What we found
The funds that meet the requirements are listed in the accompanying table along with their fees, inception dates, ratings and trailing performance. Also included are the funds' maximum drawdowns (the value lost from peak to trough) measured from Dec. 29, 2019, to Sept. 26, 2020.
This article does not constitute financial advice. It is always recommended to speak to a financial adviser or professional before investing in any of the products listed here.
Ian Tam, CFA, is director of investment research for Morningstar Canada.
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