14.05.2014

In recent years China has staked its claim as a world economic superpower. Its economy has continued to power ahead while many other developed nations are still dealing with the aftermath of the economic crisis. Rising living standards and purchasing power and a growing middle class are just some of the driving forces behind its amazing economic growth story. The WIOF China Performance Fund allows investors to be part of that story, offering investment opportunities in the world’s second largest economy.

 

PHENOMENAL GROWTH

China’s economy has grown phenomenally since it was reformed and opened up more than two decades ago. The last 20 years have seen the creation of a modern, market-based economy whose growth has continuously outpaced the world’s major economies. While China is currently the world’s second largest economy, many analysts as well as international financial bodies such as the World Bank, have predicted that it will overtake the United States at some point within the next 16 years. And while China has not been immune to the global economic slump, its economy is continuing to grow at a pace massively outstripping that of not just western economies, but many other emerging and developing economies. Urbanisation on a huge scale and the foundation of ever-expanding giant metropolises around the country is also fuelling growth across all sectors while its corporate sector has mushroomed in recent years. Hundreds of thousands of domestic firms have sprung up in the last decade, from Small and Medium-sized Enterprises (SMEs) to large corporations, and China has become one of the most competitive business environments in the world.

 

One of the key drivers of the economy has been the rise and continuing expansion of a massive middle class consumer base. This is driving retail and other sectors as wealth is created and disposable income and consumption rises. This in turn is fostering the development of a sophisticated consumer economy with opportunities not just for domestic concerns but for global firms as well. And the middle class is set to get much, much bigger. According to predictions from the UN, China’s middle class will be four times the size of America’s within the next two decades, with as many as 1.4 billion middle class consumers by 2030.

 

SECTOR BREAKDOWN

 

 

LOCAL MARKET ATTRACTION

The Chinese demand for raw materials to fuel its rapid growth has been well documented. Chinese companies have invested heavily in and established strong economic ties with resource-rich regions of the world such as Africa, Latin America and Russia. But the Chinese market has also become one of the most attractive for leading firms from the developed world. From the outset of its economic reforms, China opened its economy to foreign companies and it is now a key market for a number of the world’s biggest firms. The economic transformation in China has also included the founding of equity markets which have proved to be not just another key driver of the economy but are also fast becoming a crucial source of finance for domestic SMEs. Firms of all sizes and from all sectors are listing their shares on the Shenzhen and Shanghai stock exchanges, the latter of which is one of the world’s largest bourses.

 

OUTLOOK

Mixed macro data continues to raise some concerns about economic growth and while Chinese policymakers are keen to restrict credit growth, they are in a predicament as they try to balance needs to implement reform, rebalance the economy and meet growth targets. However, authorities have made it clear that they will do what they need to ensure healthy economic growth and have pledged to continue economic reforms. But no matter how the Chinese economy fares in the short and medium term, the Fund is well-prepared. Its holdings are selected using a systematic investment process which sees the portfolio manager focus on isolating the most appropriate investment styles for any given market, stylistically hedging the portfolio for any eventuality.

 

INVESTMENT ADVISER

The Fund’s investment adviser is Cogent Asset Management Ltd. The founder directors of Cogent Asset Management Ltd have previously managed award-winning and top performing funds across various categories. The team has developed a propitiatory strategy for managing equities through a process driven and systematic approach to investment which rigorously implements stock selection based on quantifiable fundamental criteria.

 

IMPORTANT NOTE: This report has been prepared for information only, and it does not represent an offer to purchase or subscribe to shares. World Investment Opportunities Funds (“WIOF”) is registered on the official list of collective investment undertakings pursuant to part I of the Luxembourg law of 17 December 2010 on collective investment undertakings as an open-ended investment company. WIOF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. WIOF prospectus is available and may be obtained through www.1cornhill.com. Before investing in any WIOF Sub-fund(s) investors should contact their financial adviser/legal adviser/tax adviser and refer to all relevant documents relating to the WIOF and its particular Sub-fund(s), such as the latest annual report and prospectus that specify the particular risks associated with the Sub-fund, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser/legal adviser/tax adviser, they should consider whether the WIOF is a suitable investment for them.