Edinburgh investment giant Abrdn has announced the launch of a China Next Generation Fund, a small and mid cap (SMID) companies fund “primarily investing in the bottom 30% of the Chinese equity market, both onshore and offshore.”
Abrdn believes the smaller firms hold lower regulatory risk as Chinese Government attention and scrutiny has mainly been focused on much larger companies.
Abrdn said China is the world’s second largest equity market and with 88% of China’s companies falling into the SMID market, the new fund “is an exciting extension of Abrdn’s existing Chinese equities franchise.”
It said the new fund will provide investors with access to opportunities in innovation including the Shanghai Star Market, the science and technology focused equities market established in 2019.
Investing in 30-60 stocks, the fund will have “a strong tilt towards new economy and innovation.”
Abrdn has been investing in China for 30 years and the fund will be managed by the 14 strong China Equities team, lead by Nicholas Yeo.
With an A+ ESG rating from UN PRI and AAA ESG rating by MSCI, the team is based in Hong Kong and Shanghai, and is supported by Abrdn’s wider Asian and Global Emerging Markets equities teams on company research.
The new fund aims to achieve a combination of growth and income and aims to outperform the MSCI China All Shares Smid Cap Index (USD) benchmark before charges.
Yeo said: “SMIDs are the economic backbone of China, offering attractive valuations and significant alpha potential.
“They hold lower regulatory risk as attention and scrutiny has mainly been focused on large companies.
“Smaller companies, meanwhile, are benefitting from policy support aimed at promoting more competition and innovation.
“Furthermore, coverage of SMIDs by brokers tends to be relatively thin, providing an information edge for active investors who carry out their own due diligence and research – it’s an exciting time to open up these diverse opportunities to investors. abrdn is proud to be one the first asset managers to have developed a dedicated China SMID capability.”