The Ignis International China Fund (IE00B0S5QM01) is actively managed with a focus on investing in companies with above-average growth prospects. It has beaten its benchmark, the MSCI Zhong Hua NR USD Index, over the past one, three and five years, returning 11.4 per cent over three years to 30 September 2013 compared with a 6.9 per cent loss for the average China equity fund over the same period.
Fund manager Diamond Lee believes a new breed of company is starting to emerge in China as the country transitions into a more free-market economy. He says: "There is a parallel universe whereby large state-owned behemoths continue to dominate traditional sectors such as energy, telecoms and banking. At the same time, the most exciting and fastest-growing companies often operate in service and consumer sectors.
"In contrast to the state-owned giants, this new breed of company is privately-owned, motivated, with management teams which have the ability to plan and execute growth strategies."
Mr Lee believes Tencent (HKG: 700), his largest holding at over 8 per cent of the fund, is a good example of a company that is poised to continue thriving during the next phase of Chinese growth.
He says: "Tencent is the largest internet company in China, as measured by profits and the number of active users. Tencent provides a suite of internet services including social media, mobile games and electronic payments. The internet industry requires a large user base to justify costly research and development projects, and the Chinese market is ideal from that perspective. Its development is also encouraged by a government that does not want to rely on western internet providers for national security reasons.
"Tencent has the financial resources to run multiple projects costing hundreds of millions of US dollars at a time, which is key in an industry known for fast-paced progress. For example, user profile analytics is complex but vital in providing advertisers with information about their target audience."
