Allianz China A-Shares
The fund concentrates on the stocks of companies that are incorporated in China and that are listed as A-shares on the stock exchanges of Shanghai or Shenzhen. The Chinese A-share market is priced in the Chinese currency and was originally only for Chinese investors, so has a large retail investor base. The market is also very large and very inefficient, providing great opportunities for active funds like this one. The fund targets sustainable growth businesses at reasonable valuations and has 50 to 70 holdings, predominantly in larger companies.
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Shao Ping Guan, Lead Manager The fund is co-managed by Shao Ping Guan and Kevin You. Shao Ping was appointed as Allianz's Head of China Equity on July 1, 2023. He joined AllianzGI after 16 years at Goldman Sachs Asset Management, where he led the China equity team since 2017. Before that, Shao Ping held positions at UBS Asset Management, Credit Agricole Asset Management, AXA Asset Management, and OUB Asset Management. With nearly three decades of investment experience, including 17 years focused on China, Shao Ping is based in Allianz’s Hong Kong office.
Kevin You, Deputy Manager Kevin joined the firm in 2015 as a research analyst focused on China industrials, covering areas such as construction machinery, electric vehicles, industrial automation, and alternative energy. Since 2021, he has been involved in managing the AllianzGI All China Equity, AllianzGI China A-Shares, and AllianzGI China A Opportunities strategies. With 17 years of industry experience, Kevin previously worked at Credit Suisse, Samsung Securities, and CIMB Securities, specializing in China equity research. He holds a Master’s degree in Risk Management Science from the Chinese University of Hong Kong and a Bachelor’s degree in Business Economics from the University of Durham, UK.
Shao Ping Guan, Lead Manager The fund is co-managed by Shao Ping Guan and Kevin You. Shao Ping was appointed as Allianz's Head of China Equity on July 1, 2023. He joined AllianzGI after 16 years at Goldman Sachs Asset Management, where he led the China equity team since 2017. Before that, Shao Ping held positions at UBS Asset Management, Credit Agricole Asset Management, AXA Asset Management, and OUB Asset Management. With nearly three decades of investment experience, including 17 years focused on China, Shao Ping is based in Allianz’s Hong Kong office.
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Kevin You, Deputy Manager Kevin joined the firm in 2015 as a research analyst focused on China industrials, covering areas such as construction machinery, electric vehicles, industrial automation, and alternative energy. Since 2021, he has been involved in managing the AllianzGI All China Equity, AllianzGI China A-Shares, and AllianzGI China A Opportunities strategies. With 17 years of industry experience, Kevin previously worked at Credit Suisse, Samsung Securities, and CIMB Securities, specializing in China equity research. He holds a Master’s degree in Risk Management Science from the Chinese University of Hong Kong and a Bachelor’s degree in Business Economics from the University of Durham, UK.
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Investment process
As the name suggests, Allianz China A-Shares only invests in Chinese A-shares. The target is to return 3-5% per annum over the index, over a market cycle and gross of fees.
The managers do not rely on simplistic investment screens despite the very large nature of the A-share market. However, they do exclude stocks below $1bn market cap to remove the smallest companies with low liquidity.
Allianz China A-Shares benefits from having a well-resourced team. Each analyst covers 30-50 stocks in depth with a lighter monitoring of around another 100 names. The approach is to be ‘narrow and deep’ with research focused on parts of the market which are ignored by others. Typically, it takes about two to three months to initiate a new position. The fund has a much longer investment time horizon than the average market participant and turnover is around 40%, implying an average holding period of between two and three years.
Allianz China A-Shares has a ‘growth at a reasonable price’ (GARP) philosophy. The managers have three main considerations when contemplating an investment. Firstly, is the company growing faster than the market and is the growth sustainable? They look to avoid firms that are exposed to potential future technological or regulatory threats.
Secondly, does the company have a strong balance sheet and is it well capitalised? The managers look to see if its cash flow has a favourable outlook and if the accounts are transparent, as well as assessing the culture of the company and management.
Finally, they will look at valuation using a variety of different metrics depending on the industry.
The team also benefits from the ‘Grassroots’ research division of Allianz Global Investors. Grassroots research is a separate entity that conducts investigative research at a local level. This allows the team to get information faster and more accurately than the market. The team typically commissions 45 Grassroots research reports a year.
Stock ideas are discussed and reviewed in a weekly meeting. Stocks are sold when the team’s price target is met or there is a change of circumstances which alters the investment case.
Risk
The Chinese A-Share market can be very volatile. To help manage risk, sector positioning can only be a maximum of +/-5% from the benchmark and the maximum active weight in one stock is 5%. There will also be currency risk.
ESG
ESG - Limited
While this fund has no inherent ESG focus, Allianz Global Investors has a policy of putting ESG at the core of investment thinking. It treats ESG issues as a source of potential risk, and therefore focuses on identifying them through a variety of sources to assess whether that risk could impact the investment case. This work is conducted through a proprietary ESG Risk Signal system. It uses third-party data initially, before being built on internally to identify potential concerns. These concerns are given to managers and analysts who then review and discuss potential risks. They also use the size of the firm to crowdsource thoughts from elsewhere in the business, using an internal communication platform to share ideas and thoughts. This means stocks are not simply given a generic score, but their ESG risks exposures are considered in the round. If ESG risks are identified, the firm will try to engage with a company to make improvements, but will not restrict managers establishing a holding.
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