DWS, the asset management arm of the Deutsche Bank group, has completed a joint venture with Harvest Global Investments, a fully-owned subsidiary of Harvest, the second largest Chinese asset manager.
Craig Chen, the vice-president of Harvest Global Investments, also manages the DWS Invest Chinese Equities fund.
As Fund Strategy reported last week, the fund was one of the 10 that DWS brought into the British retail market.
Sven Erik Knoop, the managing director and head of European retail distribution at DWS, says the joint venture with Harvest gives DWS access to a broad local research team.
“This is a strong argument for the fund,” he says.
The €217.9m (£200.2m) fund is domiciled in Luxembourg, managed out of Hong Kong and uses DWS compliance policy. All dealings are conducted in Frankfurt.
“Harvest is a very research-based company,” Chen says. “Chinese policy and country specific characteristics require a lot of understanding.” At Harvest, 100 people work on the research and investment team.
Having access to the resources of two different asset managers, Knoop and Chen say, will be highly beneficial for the China fund. “While our competitors often have a global point of view, we have a domestic point of view,” Chen says.
In his role as portfolio manager, Chen and his team pay close attention to new trends emerging in China.
At present he is focusing on a variety of trends, including internet, alternative energy, infrastructure and urbanisation.
Over the past two months, Chen added more beta to the portfolio by investing in mid and small caps. When selecting holdings he looks at quantitative indicators such as cash flow, return on equity, growth against current price to book value, and quantitative indicators such as company strategy, corporate governance, barriers of entry for technology and brands. He also looks for companies with high profit margins and those that have a competitive edge.
According to Chinese regulation a foreign asset manager can hold a maximum stake of 30% in a Chinese one. Harvest Global Investors is the largest Sino-foreign joint venture asset manager.