Fund in Focus: First State Greater China Growth

Andy Parsons, Advice team manager at The Share Centre, explains how investors interested in long-term capital growth and current exposure to one of the world's most vibrant economies, could benefit from the First State Greater China Growth fund.

"Over the last decade, China has become a prominent market in the world economy. Its growth has been meteoric as China becomes more open to overseas investment, freer with its media and adopts a more capitalist market system.

"China's potential for growth can be demonstrated by the projection of the International Monetary Fund. While it projected negative global growth for the world economy in 2009, China is still expected to grow between 6-7 per cent during the same period.

"The First State Greater China Growth fund is an ideal way for investors to gain exposure to China and its growing economy. The fund aims to achieve long-term capital growth by investing in equity and equity-type securities that have a predominant part of their economic activities in the People's Republic of China, Hong Kong and Taiwan.

"The fund invests in approximately 65 to 80 companies, favouring large cap companies with some exposure to small and mid caps, the idea being they are held for the longer-term, thereby reducing portfolio turnover.

"Since March 2007 the fund has been co-managed by Martin Lau, manager of the fund since 2003, and Ho Hsiu-Mei. Both managers have significant experience of the region. The fund also benefits from the fact its managers and analysts are involved with the participants of its markets on a daily basis.

"The fund's performance over 1, 3, and 5 years on a cumulative basis to date is impressive, ranking 1st quartile in these periods. This can be attributed to a combination of strong stock selection and the manager's ability to shift the bias of the fund across sectors, market capitalisation and different share types. Over the three years to date on a cumulative basis the fund has returned 71.49 per cent, compared to 33.18 per cent for the sector, ranking it 1/67.

"The managers continue to impress with their ability to read the market. First State are widely recognised as having strong performing funds covering the Asian region, with their current AAA rating by Standard & Poor's being a testament to their overall performance. Due to the nature of the geographical region and the development of their financial markets, we rate this fund as a high risk."

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