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Key learnings after five years of the RBC China Equity Strategy
Siguo Chen, Portfolio Manager, RBC Asian Equity discusses what we have learnt in the five years since the launch of the RBC China Equity Strategy and what sets us apart from our competitors.
What sets this strategy apart from its competitors?
As fund managers, we all have more or less the same toolbox. We might have different approach. Our approach a bit different than the rest of the street is that we tend to be more bottom-up. We have the thematics we like, for example, we like the high-end manufacturing as a thematic, we like health and wellness for a thematic, but we do everything very bottom-up.
So we go to China, more than one team members every month go visit China, visit all the companies, not necessarily the companies we invest in, but the upstream, the downstream, the competitor, policymakers, think tank to get a very comprehensive view of the company. Try not to get swing too much by the macro, by the narratives, by sometimes the sentiment, and with a very good gauge on the valuation, I think the outcome of our investment choices has been decent.
On top of that, we do have a policy overlay, investing in China, people would like to say China is different, China is not different, it's irrelevant. What's important is that we are investing in a policy-heavy market. We spent, I would put a number, it would be 20%, 30% of our time trying to navigate what is the policymakers, what's on their mind and what's their next step.
With that in mind, I think it helps us to avoid some investment trap and then help us to choose better which area to be in because sometimes investing alongside the policymakers, can be a strong investment case.
What are your key learnings after five years of the RBC China Equity Strategy?
You probably learn more during the difficult time than when you're doing well because I remember when the time or the years where we had 20% outperformance easy. And there are times where the market were down 20% and the year we were doing flat which was good outperformance against the market, but I remember it was already very difficult.
Then after that, we had three consecutive years of not good return and then we have to try everything to generate good outperformance then that's getting more and more difficult. I think the best thing I've learned is that always be open-minded to different sectors, to different geopolitical assumptions, open-minded to different styles that we do.
In RBC, we have this overarching philosophy to invest in quality companies with a strong balance sheet and good cash flows, but let's not be dogmatic. We will be open to ideas or investment opportunities that are best for our clients, but at the same time, we don't want to drift too much in terms of our style. When markets are bad, beggars can't be choosers. Sometimes we just got to be more flexible. Now, that's one important thing I've learned as well.
Of course, keep your spirit up. Don't get swinged too much by the negative sentiment sometimes, because the worst sentiment, that could be the best investment opportunity as well.
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