China’s Top Stock Fund Doubles Down on Quant-Fueled Strategy

Updated on
  • Quantitative fund’s three-year return beats all peers in China
  • Chang Xin Asset Management plans to boost headcount, offerings

The company behind China’s top-ranked equity mutual fund is doubling down on technology that helped secure a 47 percent return over the past three years.

Shanghai-based Chang Xin Asset Management Corp. plans to hire a dozen more people and double its quantitative fund offerings this year to more than 20. Its trading models, which rely on historical databases to make decisions, helped its top fund achieve a 10 percent return last year even as the benchmark Shanghai Composite Index tumbled 12 percent. 

Zuo Jinbao, who has managed the Chang Xin Quantitative Pioneer Equity Fund since 2015, sees quantitative trading as an underdeveloped area in China and a natural match for the market.

"Quantitative trading was not known to A-share investors until 2015," Zuo said. The approach is "a good strategy to achieve stable returns in a volatile market easily affected by various events such as policy changes and foreign exchange drama."

The fund’s return over the past three years beat all 74 other China-based equity mutual funds established for longer than five years and with assets of at least 1 billion yuan ($144 million), according to data compiled by Bloomberg.

Quantitative hedge funds are booming in Asia, though their slice of the global pie remains small. Such funds outperformed Chinese equity hedge funds in the first three quarters of 2016, according to data provider Eurekahedge Pte. There are 141 quantitative equity mutual funds in China with assets of 85.8 billion yuan as of last month, according to an Industrial Securities report. Traditional equity mutual funds hold total assets of more than 200 billion yuan, the report showed.

The Shanghai Composite fell 1.3 percent this week, its sixth loss in the past seven weeks.

According to the latest Chang Xin Asset Management quarterly report, the fund held the following stocks as of Sept. 30:

  • Top 10 holdings were Guangxi Hechi Chemical Co., Sichuan Guangan AAA Public Co., Fujian Green Pine Co., Maiquer Group Co., Chongqing Wanli New Energy Co., Guangdong Weihua Corp., Hainan Shuangcheng Pharmaceuticals Co., Shandong Rike Chemical Co., Shanghai No. 1 Pharmacy Co., Jiangsu Sopo Chemical Co.
  • These 10 holdings accounted for 7.9 percent of total assets.
  • Some 56% of fund assets were allocated to manufacturing, followed by the retail and technology sectors.

— With assistance by Feng Cai, and Jeanny Yu

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