China funds struggle in 2021 on back of regulatory crackdown

Three China funds feature in the list of 10 worst-performing strategies of 2021

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China funds were among the worst performing last year as investors became spooked by the government’s regulatory crackdown across a range of sectors.

Three China funds were in the 10 worst-performing of 2021, including Gam Star China Equity in fourth place (-26%), Invesco PRC Equity (-25.9%) in fifth and Fidelity China Consumer (-24.1%) in 10th, according to Fundinfo data compiled by Fairview Investing.

Last year the Chinese government unveiled an agenda to tackle the excesses of capitalism, which saw it clamp down on regulation for education, technology, property and gaming companies. The collapse of Evergrande, China’s most indebted property company, also gave investors the jitters.

Fairview Investing founder and director Ben Yearsley said it was unsurprising China funds were in the worst-performing list given the regulatory crackdown. But he added: “Who hadn’t factored political risk into a China thesis?”

Topping the list of worst performers was the Garraway Absolute Equity, a long/short equity portfolio, which fell 34.7% during the year.

“This fund has to be among the most volatile as it frequently features either at the top or bottom of the IA universe,” said Yearsley.

The second worst performing fund, however, was LF Equity Income, the now defunct Woodford Equity Income fund formerly run by fallen fund manager Neil Woodford. The fund, which is still being wound up by its authorised corporate director Link Fund Solutions 18 months after it was frozen, produced a total return of -34.4% during the year.

“Good old Woodford, the gift that keeps on taking,” said Yearsley.

Two Brazil funds also featured in the worst-performing list, with HSBC GIF Brazil Equity and JPM Brazil Equity in third and seventh position respectively, with returns of -28.1% and -25.2%.

Other funds in the list included HSBC MSCI Turkey in sixth position (-25.6%), Aviva Investors European Property (-24.8%) and IFSL SIM Junior Gold and Silver Miners (-24.7%).

Funds – 2021 (bottom 10) Total return %
Garraway Absolute Equity -34.72
LF Equity Income -34.43
HSBC GIF Brazil Equity -28.1
GAM Star China Equity -25.97
Invesso PRC Equity -25.93
HSBC MSCI Turkey -25.59
JPM Brazil Equity -25.19
Aviva Investors European Property -24.77
IFSL SIM Junior Gol & Silver Miners -24.7
Fidelity China Consumer -24.12
Source: Fairview Investing using FE Fundinfo data

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