The Investment Management Association (IMA) is to create a China/ Greater China sector in January.
Announcing the launch last week, the IMA said the sector would be defined as funds investing at least 80% of their assets in equities of the People’s Republic of China, Hong Kong or Taiwan.
Investment in assets can be direct or indirect to reflect investors’ synthetic access to China. (article continues below)
The IMA says several offshore funds will be eligible for classification in the sector and that the definition will be reviewed after a year as it gains maturity and the number of funds in it grows.
The number of funds in the sector at launch has yet to be finalised, but the figure is likely to be about 20, split fairly evenly between onshore and offshore vehicles.
James Budden, the marketing director at Baillie Gifford, which runs the Baillie Gifford Greater China fund, says the move can only be a boon for both groups and investors.
“It’s been quite frustrating. If you were looking for China funds you might think the Fidelity investment trust was the only one, but there are funds run by Jupiter, Gartmore, First State – some really good funds.
“Our fund has been running for a couple of years and it’s been submerged with 75 other funds in the Asia ex-Japan sector.
“It does make it quite difficult to focus on China itself.”
Budden says the China/Greater China will be an important sector from an asset allocation point of view.
“This will encourage intermediaries to look at China, whereas to date they may have preferred to get exposure to the region via a more generalist or emerging markets vehicle.
“It is also addressing the imbalance between the world index having 2% in China while China represents 16% of the world’s GDP.”
James Davies, the head of fund research at Chartwell Investment Management, welcomes the IMA grouping like funds together and says there are other areas that could also be addressed.
“It will help people who want to allocate and want a way to compare like with like,” Davies says.
His only concern is that there is perhaps too much emphasis on China relative to other emerging markets.
“We often use more generalist emerging markets funds and wouldn’t want China to muscle out other areas,” he says.
The IMA has also redesigned the Global Growth sector.
From January 1 the sector will be renamed Global and will accommodate funds that invest at least 80% of their assets globally in equities, regardless of thematic or industrial focus.
Global income funds will remain in the sector for the time being. However, the sector committee intends to consult on the potential creation of separate global and European equity income sectors next year.