1. Larry Shepherd larry@quantshop.com + 61 4 1115 0210 June 2015
China A Share Funds Performance Study Last 5 years using Style Research’s Portfolio Analyzer Markets Analyzer
Larry Shepherd
June 2015

2. Active Portfolio Returns – 5 years
Majority add value
The median manager of our sample, based
on semiannual holdings, outperformed by
around 25.5% in CNY terms over last 5 years to end May 2015.
overweight growth and underweight value
overweight momentum both in ST and MT
slightly large cap
Benchmark, 190 funds, 5 years to end May 15

3. Forecast Risk Tracking Error Breakdown
Benchmark, 620 funds, as at end Dec 14

4. Forecast Risk As at June 2014, 244 funds
As at December 2014, 620 funds
Benchmark, as at

5. Forecast Risk Decomposition
As at June 2014
As at December 2014
Benchmark, as at

6. Data
We collect holdings data of China A Share funds, semiannual based, for end Dec 2014, we have 630 funds’ data; for calculating five years’ return, we select 190 funds which have five years history, over 60% equity and run the analysis
Methodology
Using Style Research Portfolio Analyzer to examine the sample group: portfolios against Benchmark =CSI 300, currency = CNY
Performance analysis: assume buy and hold
Using Style Research Markets Analyzer to exam the market: market cap weighted, minimum stock size USD 1,000 million, sector adjusted, 6-month rebalance

7. Allocation

8. Stock Selection

9. Interaction

10. Sectors
We start by breaking down the overall active returns into contributions due to sector exposures and stock selection activities within these grouping.

11. Return Contributions - Sector
Benchmark, 190 funds, 5 years to end May 15

12. Return Contributions - Sector
To August 2014, 244 funds
To May 2015, 190 funds
Benchmark, 5 years to end

13. Sector Returns
Benchmark, 5 years to end May 15

14. Manager Active Returns - Sector
Benchmark, 190 funds, 5 years to end May 15

15. Active Manager Returns
Benchmark Returns
Active Manager Returns
Benchmark, 5 years to end May 2015

16. Manager Active Returns - Sector
To August 14
To May 15
Benchmark, 5 year returns

17. Sector Distribution - Dec 2014
Benchmark, 620 funds, 5% outliers

18. Sector Distribution Jun 14, 244 funds (Market)
Dec 14, 620 funds (Benchmark)

19. Return Contributions – Sector
Benchmark, 190 funds, 5 years to end May 15

20. ALLOCATION Returns - Sector
Benchmark, 190 funds, 5 years to end May 15

21. ALLOCATION Returns - Sector
To August 2014
To May 2015
Benchmark, 5 years to

22. Return Contributions – Sector
Benchmark, 190 funds, end May 15

23. STOCK Selection Returns - Sector
Benchmark, 190 funds, 5 years to end May 15

24. STOCK Selection Returns - Sector
To August 2014
To May 2015
Benchmark, 5 years to

25. Manager Sector Characteristics – ¾
Negative/bad/smaller
Position:
Finance
Risk: na
Return Total:
Return Allocation:
Finance and Telcos
Return Stock: na
Positive/good/bigger IT
Risk: Stock bets
Energy, Utilities, IT, Healthcare and Materials
Returns Allocation:
Energy
IT, Healthcare and Material
Benchmark

26. Styles
Next, we examine the return of our sample universe broken into contributions due to Style exposure.
Large Value= Market Cap top 80%, Book to Price top 50%
Large Growth= Market Cap top 80%, Book to Price bottom 50%
Small Value= Market Cap bottom 20%, Book to Price top 50%
Small Growth= Market Cap bottom 20%, Book to Price bottom 50%

27. Return Contributions – Style
Benchmark, 190 funds, 5 year to end May 15

28. Return Contributions - Style
To August 2014
To May 2015
Benchmark, 5 years to end

29. Style Returns
Benchmark, 5 years to May 2015

30. Manager Active Returns - Style
Benchmark, 190 funds, 5 years to end May 15

31. Active Manager Returns
Benchmark Returns
Active Manager Returns
Benchmark, 5 years to end May 2015

32. Manager Active Returns - Style
To August 2014
To May 2015
Benchmark, 5 years to end

33. Style Distribution Dec 2014
Benchmark

34. Style Distribution
June 2014
December 2014

35. Return Contributions – Style
Benchmark, 190 funds, 5 years to end May 15

36. ALLOCATION Returns - Style
Benchmark, 190 funds, 5 years to end May 15

37. ALLOCATION Returns - Style
To August 2014
To May 2015
Benchmark, 190 funds, 5 years to end May 15

38. Return Contributions - Style
Benchmark, 190 funds, 5 years to end May 15

39. STOCK Selection Returns - Style
Benchmark, 190 funds, 5 years to end May 15

40. STOCK Selection Returns - Style
To August 2014
To May 2015
Benchmark, 5 years to end

41. Manager Style Characteristics – ¾
Negative/bad/smaller
Position:
Large (Value and Growth)
Risk: na
Return Total:
Large Value
Return Allocation:
Large Cap
Return Stock: na
Positive/good/bigger
Small Growth
Risk: Style & Stock bets
Small Cap (Value and Growth)
Returns Allocation:
Small Cap
Large Growth
Benchmark

42. Style – what else

43. Size Distribution – 40/40/20
Benchmark, 620 funds, as at end Dec 14

44. Active Style Tilts
Benchmark, 620 funds, as at end Dec 14

45. Active Style Tilts
Benchmark, 620 funds, as at end Dec 14

46. Style Summary – Managers
Underweight
Value
Momentum
Debt/Equity
Quality
Macro
Overweight
Growth
Forecast
Small cap
Low Beta
Foreign Sales
Benchmark, 620 funds, as at end Dec 14

47. ALLOCATION Returns - Style
Benchmark, 190 funds, 5 years to end May 15

48. ALLOCATION Returns - Style
Benchmark, 190 funds, 5 years to end May 15

49. Style Returns Summary – Managers
Negative – 3/4
Value
Growth
Other
Quality
Macro
ESG
Positive 3/4
Benchmark, 190 funds, 5 years to end May 15

50. Some interesting numbers

51. Who get the highest return?
Last 5 years Cumulative Active Return (Base Currency)
Funds
Return 1
Baoying Strategic Growth
330% 2
Galaxy Sector
268% 3
Huashang Dynamic
262% 4
Baoying Resources Selected
203% 5
Guotai Jinniu Innovation Growth
192% 6
LC Value
185% 7
Fortune SGAM Dividend Growth
178% 8
AXA-SPDB Value Growth
166% 9
Huashang Sector Leading
153% 10
Fullgoal Tianhe
145%

52. Best Sector Performer? Last 5 years Return from Sector Funds Returns
Cons Disc
Huashang Dynamic
110.1%
Cons Staples
Baoying Strategic Growth
46.8%
Energy
Baoying Dividend
27.2%
Financials
Huashang Sector Leading
28.8%
Health Care
Galaxy Sector
87.1%
Industrials
Invesco GW Resources and Monopoly
77.4%
Info Tech
195.0%
Materials
Baoying Resources Selected
100.7%
Telecoms
Huaxia Strategy Select
9.9%
Utilities
Bosera Sector Focus
21.4%

53. Best Style Performer? Last 5 years Return form Style Funds Returns
Large Value
Penghua Value Advantage
32.4%
Large Growth
Baoying Strategic Growth
243.9%
Small Value
Galaxy Sector
59.2%
Small Growth
Baoying Resources Selected
116.1%

54. Baoying strategic growth
Case Study 1
Baoying strategic growth

55. Big Style and Sector bets
IBES Sales LT

56. IBES Sales – 24% on 1 stock

57. Big Sector bets

58. Adjusting for Sectors - similar

59. And typical of portfolio

60. Small Growth and Stock Risk

61. Currently high stock risk

62. Most of the performance is recent

63. Returns from Stock Selection

64. Most of return from Stock

65. But some Styles matter
ROE

66. What drove the ROE returns

67. Case Study 2
Galaxy sector

68. Small Cap Growth, Big Sector Bets
IBES Sales LTG

69. 37.45 is large relative to benchmark

70. Adjusting for Sectors

71. Similar to past

72. Small Growth, Large Sector and Stock Risk

73. Currently LOW Sector Risk

74. Good Recent Performance

75. Returns from Stock & Style

76. Returns from Stock & Style

77. Style ALLOCATION returns
IBES Sales LTG

78. Why did long term Forecast Sales Growth fail?

79. Case Study 3
Haushang dynamic

80. Small Cap Growth, Big Sector bets
momentum

81. Did Momentum make money?

82. Small Growth, Large Sector and Stock Risk

83. Adjusting for Sectors - Similar

84. Almost Value!

85. Currently low Stock Risk

86. Consistent Outperformance

87. Stock, but Style>Sectors!

88. Stock, but Style>Sectors!

89. GDP Shock

90. What drove GDP Shock

91. Conclusion Many managers outperform
Stock Selection is dominant driver of returns
Risk is driven by Stock and Sector bets
Returns (-ve) from Style factors can be substantial

92. Thank You Q&A