MegaTrust Investments, a boutique fund manager specialising in Chinese equities, has launched the MegaTrust Yangtze Fund IV, the first offshore fund based on its award-winning A-share strategy with over nine years of track record.
The Fund is specifically created for global institutional investors wanting to invest in China A- shares through active management and stock selection.
The Yangtze Fund IV is a Cayman Islands-based vehicle designed to trade A-shares through China- Hong Kong Stock Connect, a cross-border access scheme covering roughly 1,500 A-share stocks. The Fund will seek to replicate the success of its on-shore predecessors in mainland China, namely the Yangtze Fund II and the Yangtze Fund III, which started trading in April 2008 and December 2010 respectively. The Fund will be based on the same investment philosophy, strategy and process as the Yangtze Fund II and III, and managed by the same investment team.
“The MSCI announcement on A-share index inclusion is a wake-up call for global investors,” says Charlie Chen, Portfolio Manager of the Fund and CIO of MegaTrust Investments. “They will soon be required to study A-shares and then put money in this market. However, generating sustainable Alpha in A-shares can be challenging. We are launching this Fund to help global investors do exactly that.”
Chen is a pioneer of Quality and Value investing in China. Before founding MegaTrust, he was a top performing QFII (Qualified Foreign Institutional Investor) portfolio manager, and managed the original “Yangtze Fund” at Fortis-Haitong Investment Management JV in China. Over the years, Chen and his colleagues have perfected a strategy named “Quality Growth at a Reasonable Price” (QGARP), which is tailored for the A-share market. This strategy is applied with high conviction, persistence and discipline by the investment team, in order to achieve the desired results.
The QGARP strategy takes a somewhat contrarian approach to a market that is dominated by unsophisticated, retail investors, who often trade stocks on rumours and momentum as opposed to solid research.
“Quality growth is essentially different from high growth,” says Qi Wang, CEO of MegaTrust Investment (HK), who studied GARP (Growth at a Reasonable Price) as a quantitative analyst at Goldman Sachs in 1997. “The quality angle adds more depth to fundamental research, and thus QGARP can be viewed as an enhanced version of GARP. For example, since GARP represents a cross-section of value and growth, the focus on quality can help eliminate the ‘value traps’, namely cheap stocks with no future.”
