Brief in Chinese:
中国最大的成就之一在于成功地吸引了投资人的注意力。包括我自己在内的一些投资者，过去可能反应太迟钝，现在也认识到在中国的一些投资是值得期待的。
熟悉我的读者知道，我个人十分青睐Vision Opportunity China（中国机遇）这支上市基金，这支基金为那些偏好风险的投资人量身定做，投资于高风险高回报的微型股。如果说要选择盘子大一些的股票，我还看好Martin Currie China Fund（马丁可利公司的中国基金），这是一支在美国上市的封闭式基金，拥有良好的投资回报业绩，专注投资于中小型股票。当然，也有一些投资者认为JP摩根的中国投资信托基金更能化解美元货币风险，这支基金在英国上市。
对于大盘股，我认为交易所指数基金（ETF）可能是从中国经济增长中获益的最好选择，可喜的是，我们周围有不少这样的基金：iShares, Lyxor, RBS ， Deutsche（基金名）等等，其费用率都在100个基准点以下。
但是ETS基金，和积极管理式基金相反，被定义为长期投资类型，投资这类基金是基于对中国股权价值上升的预期。因此更多警觉型的投资人倾向于长短期对冲基金投资策略，由经验丰富的本地投资经理操作，形成对中国投资的双向收益：当市场繁荣时选择各类股票进行投资，当市场不景气时切掉大盘股或转为现金。
遗憾的是对于个人投资者，起初没有任何一支单位信托或投资信托在做这个，直到Insynergy公司的China Absolute fund（绝对中国基金）出现，以原有的GAM大中华对冲基金为基础，由Michael Lai管理。
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One of China’s greatest achievements has been its success in capturing investors’ imaginations. A few investors, myself included, may have erred on the side of bearishness, but most now accept that some exposure to China is desirable.
Readers will know that I’m quite drawn to the Vision Opportunity China listed fund (VOC), which looks attractive to adventurous types who want a punt on high-risk micro caps – the uplift in net asset value (NAV) has been superb. Moving up the capitalisation scale, I also like the look of the Martin Currie China Fund, a US listed closed-ended fund with a great track record in small to mid caps – although investors worried about dollar risk may be better off looking at JPMorgan’s China Investment Trust, listed here in the UK.
For large caps, though, I I sense that an exchange-traded fund (ETF) might be the best way to capture China’s growth and, luckily, there are plenty of them around: iShares, Lyxor, RBS and Deutsche all have trackers with total expense ratios well below 100 basis points.
But these ETFs, like their actively-managed rivals, are by definition “long only” – you invest in them because you think Chinese equities will go up. So more cynical types might be drawn to a long/short hedge fund strategy that allows an experienced local manager to play both sides of the China trade: going long with small to large caps when the market is booming, and shorting large caps or moving into cash when the market is falling (as it will do with regularity).
Unfortunately for private investors, there weren’t any unit trusts or investment trusts that did this – until Insynergy’s China Absolute fund, based on the GAM Greater China hedge fund managed by Michael Lai, came along.
Now, I have to say that I find most absolute return funds a triumph of style over substance, fuelled by marketeers who want to attract investors worried about volatility. By having a traditional long-only manager running a book of open short positions, in an attempt to make money from falling prices, they add a lot of risk.
Running extensive short positions requires great market-timing skill and a willingness to hold a lot of cash, which few long-only managers possess.
However, Michael Lai and GAM pass most of these tests with flying colours. GAM is widely regarded as one of the best long/short houses, with managers that are heavily incentivised to produce profits even in poor markets. Insynergy markets its fund, run by Lai, on retail sales platforms.
Crucially, Lai has been running a long/short strategy since 2006 with great success. He is clearly happiest as a stockpicker, targeting mid- to small-caps in the notoriously inefficient Chinese markets. But he’s also willing to run big short positions and move heavily into cash. At various times in the past four years, he’s been running cash positions of more than 55 per cent of the fund’s value.
But that doesn’t tell us whether this might be a good investment. So I also like to look at three criteria: risk control; investment process; and cost structure.
By and large, Lai’s GAM fund has managed to add alpha over the past four years, achieving superior performance to most major indices. But, most importantly, those returns have come with slightly lower volatility and smaller maximum losses – although this risk control means the fund will inevitably underperform in strong bull markets.
Lai has also adopted a disciplined investment process (see box).
However, the Insynergy fund fails my last test: cost. An annual management charge of 1.25 per cent isn’t bad but there is also a performance fee of 20 per cent of returns above the 3-month inter-bank interest rate. This is currently only just above zero, so when the market shoots up 40 per cent – as it could in volatile China – you would be paying a little under 10 per cent in total charges.
To be fair, plenty of institutional investors are willing to pay these charges and under the GAM fee structure, Lai and his team only make money if they make you money. But with index funds charging less than 80 basis points for the market return, and the managers of closed-ended funds paid around 1 per cent, I find the extra fees for shorting skills a heavy price – especially as much of the skill is in moving into cash at the right time.
Strategy: Making the right move
To assess Martin Lai’s investment process, it is worth looking at his net long/short position and his willingness to move in and out of cash. On past form, Lai is clearly happy to move aggressively into cash – going beyond 50 per cent on some occasions. He also increased his short positions to control risk in 2008 and 2009. His gross long equity position was cut to around 81 per cent of the portfolio in June 2008, for example, while his gross equity short book was increased from 1.9 per cent in December 2007 to 11.9 per cent in June 2008. An analysis of the fund data suggests that Lai hedged the portfolio with a 10.7 per cent derivative position on the market around this time.
So, if Chinese equities were to fall, Lai would probably move heavily into cash and short positions again – and wait for the market to bottom. However, his strategy does not stop the fund making losses: it was down 20 per cent in 2008.
