US asset management giant Vanguard has selected Edinburgh-based investment group Baillie Gifford — and its portfolio managers Sophie Earnshaw and Mike Gush — to co-manage its new Vanguard China Select Stock Fund.
Vanguard, which manages $8.4 trillion in global assets, has filed an initial registration statement with the US Securities and Exchange Commission to introduce the major new fund.
Vanguard China Select Stock Fund will invest in onshore and offshore Chinese equities and is intended for clients seeking “actively managed, high-alpha-target equity exposure to complement a broadly diversified portfolio.”
Vanguard expects to launch the fund in the first quarter of 2022.
“Vanguard has continued to enhance its active equity lineup by partnering with top-tier external investment advisors who provide access to sound investment strategies and expert portfolio manager talent,” said Kaitlyn Caughlin, head of Vanguard Portfolio Review Department.
“Vanguard research indicates that there is an opportunity for talented active managers to generate alpha in China’s large, but inefficient, equity market.”
Vanguard added: “The fund will be co-managed by long-tenured Vanguard fund advisors Wellington Management Company LLP and Baillie Gifford Overseas Ltd.
“Both firms have deep portfolio management experience and expertise in China and a track record of outperformance in Chinese equity markets.
“Vanguard’s confidence in these firms is underscored by existing and successful partnerships, as well as their track records of delivering value to Vanguard shareholders.”
Baillie Gifford had around £360 billion under management and advice as at November 22, 2021.
In its registration statement, Vanguard said: “Baillie Gifford follows an investment approach based on making long-term investments in well-researched and well-managed businesses with above-average growth potential.
“Baillie Gifford analyzes a company’s ability to grow by considering the industry in which it operates, any sustainable competitive advantages the company has within that industry, the ability of management to execute on the market opportunity before them, and the extent to which the company can fund growth using internally generated cash flows.
“The portfolio managers employ an additional due diligence process for Chinese companies in light of the comparative immaturity of the Chinese capital markets and the status of China as an emerging market economy.
“Baillie Gifford also considers the valuation of the company to understand the extent to which the market has already appreciated these factors …”