China

Value Partners makes High-Dividend Stocks Fund available to Mainland Investors

Value Partners Group has announced the launch of one of the Group's largest equity funds, the Value Partners High-Dividend Stocks Fund, on the Chinese mainland.

The Fund has been launched under the Mainland-Hong Kong Mutual Recognition of Funds (“MRF”) scheme, a bilateral regulatory framework which allows mutual funds of two markets to be distributed to retail investors in each market through a streamlined authorisation process. The scheme allows fund managers in Hong Kong to gain access to a large pool of international investors, based on a series on Memoranda of Understanding between Hong Kong, and China, Switzerland, France, the UK and Luxembourg.

In the press release, Value Partners has appointed Tianhong Asset Management as the fund's master agent under the MRF scheme. Established in Q4 2004, Tianhong is one of the leading mutual fund management companies on the mainland of China, according to Value partners, and boasts RMB850 billion asset under management. The firm launched the first ever Internet fund charting a course for the future of Internet finance, called “Yu’ebao”, in collaboration with payments giant Alipay.

This is the second fund of Value Partners that has received the approval in November 2019 by the China Securities Regulatory Commission (“CSRC”) as an eligible northbound fund to join the MRF scheme, after the Group's flagship Value Partners Classic Fund obtained approval in December 2018. Effective from 6 May 2020, mainland investors can subscribe to Value Partners High-Dividend Stocks Fund through Tianhong's online channels and direct sales center.

Established in September 2002, Value Partners High-Dividend Stocks Fund has an excellent track record of over 17 years. Upholding the value investing strategy and bottom-up approach, the Fund aims to provide capital appreciation to unitholders by identifying quality companies and investing primarily in a portfolio of relatively higher yielding debt and equity securities in Asian region. By end of March 2020, the Fund's assets was about USD1.71 billion.

As of 31 March 2020, Value Partners High-Dividend Stocks Fund recorded a total return of 651.5% and an annualised return of 12.2% since inception, outperforming the MSCI AC Asia (ex-Japan) Index in 13 out of 17 calendar years. For comparison, the Index returned 380.9% over the same period, representing an annualized 9.3% return. The Fund ranked first in Morningstar's Asia ex-Japan Equity category since the Fund's inception.

Leveraging the Group's in-house fundamental research capability, the Fund adopts a flexible allocation investing in both stable and cyclical high-yield stocks. Investible companies come with a robust and stable earnings outlook as well as the ability and willingness to pay dividends. The Fund's emphasis on quality among portfolio holdings has paid off as it has achieved the target return under different economic situations. Moreover, a high-dividend strategy tends to offer a good buffer during the times of crisis and to deliver relatively better returns when the economy recovers, thus making a sustainable performance throughout the entire investment cycle. Dividend-paying stocks are also widely favoured by investors amid the ultra-low rate environment.

While the pandemic has turned global, and its aftermath severely impacts financial markets, obtaining decent investment returns has become more challenging. Norman Ho, Senior Investment Director at Value Partners, sees a growing scale of negative-yielding assets emerge amid the low rate environment and uncertainty propels capital to park in safer assets, benefitting high-yield assets in the emerging market. In the emerging world, the MSCI Asia Index is trading at a discount of 20% - 30% over the mature markets. The volatility of high-dividend stocks is relatively low, making the risk-return profile more attractive than the broader market. Mr. Ho expects governments in Asia to continue adopting broader fiscal and monetary policies to stimulate the economy, which will help improve corporate earnings.

“We have seen global assets facing setbacks since the virus outbreak, and high-dividend stocks are not immune. However, the fundamentals of the quality companies in the region remain intact. Quality stocks paying high-dividends are believed to enjoy a strong rebound when markets recover from panic,” said Ho.

Industry leading Tianhong Asset Management operates with a set of professional standards in the fund selection mechanism. The process for Northbound funds starts with sorting the overseas asset classes and then selecting the outstanding funds in each asset class category.

Tony Liu, Director of International Business, Tianhong Asset Management, explains the mechanism behind the distribution partnership. “Based on our approach, only one or a few of around 30 funds will be eventually included in the distribution list.”

Under the current tide of uncertainty, global asset allocation is essential. Liu continues: “Mainland investors are keen on overseas investment. As a professional investment institution in China, Tianhong strives to offer diversified investment services to investors. Value Partners is the value investing pioneer in Asia and the renowned and sizable listed asset manager. We join hands again to take advantage of their strong track record and product development capabilities, to provide more offshore asset allocation solutions for onshore investors ultimately.”

“As one of the oldest dividend-paying equity funds in the Asian market, Value Partners High-Dividend Stocks Fund does not only stand out with its outstanding track record, but a portfolio that is well-positioned to “attack and defend” against the pandemic and to capture long term opportunities of China's economy.”