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China’s oldest equity manager launches in Australia
The smart money appears to be snapping-up Chinese onshore stocks despite the recent debt-ridden Evergrande crisis and its potential to affect markets. Investor interest in China strengthened during the fourth quarter of last year, with the main inflows coming from institutional investors rather than retail.
It hasn’t been easy for Australian investors looking to buy into Chinese onshore equity markets; making sense of Chinese markets is a tough task. Understanding the data, interpreting it correctly and assessing the associated risks a can make predicting returns a somewhat impossible journey, says Lewis Prescott of Mingshi Investment Management.
Australian investors looking for onshore Chinese exposure can now do so through Mingshi, after the firm was this week granted an Australian Financial Services Licence (AFSL) to operate in Australia.
Mingshi, which presented at The Inside Network’s Alternatives Symposium in Melbourne, will now be able to launch two Australian-domiciled funds for institutional and other sophisticated investors targeting China’s onshore markets (China ‘A’ shares) listed on the Shanghai and Shenzhen stock exchanges.
Mingshi is well-known for its quantitative approach to investing in China. Mingshi’s Optima market-neutral fund returned 33.3 per cent gross returns for calendar 2021, which was one of the best performing China-focused market-neutral funds in 2021. And the long-only Maxima fund generated 19.4 per cent gross returns for the year. This is against the MSCI China A Onshore Index benchmark’s return of 4 percent.
Speaking at the Alternatives Symposium was partner and international CEO, Lewis Prescott, who was optimistic on the outlook for China A shares, saying now is an opportune time to allocate towards the sector, owing to its unique return characteristics.
China A is less exposed to developed-market price discovery and is inefficient versus global markets. “The onshore China A-share market offers exceptional opportunity for institutional and other sophisticated investors which does not exist in any other major market.”
Prescott went on to say, “We believe that to succeed in China’s capital markets you must combine the best of fundamental financial theory with the latest in artificial intelligence. This research commitment to both fields is a key differentiator for Mingshi.”
Having obtained its AFSL it will offer:
- An A$ China A Market-Neutral strategy, and
- An A$ China A Long-Only fund.
In a company announcement, Prescott said, “Global investors, including institutional and super funds in Australia are increasing their allocations to China and they need high-quality managers. Despite the geopolitical headlines around Australia-China or US-China relationships, from a capital allocation point of view, we are still seeing incredible interest.”
