China Exposure is a must. Part II

I'm writing my thoughts based on Turtle Portfolio perspective. How do I get China exposure? Since I'm facing budget constraint running this portfolio, unit trust will be a better route. There is no point of gambling on useless warrants on Bursa. I've looked at two funds from Public Mutual and 1 fund from OSK UOB.

1. China select fund.

The fund battered in 2008, loss of 47% vs. 45% of benchmark. Based on 31 December 2008, they have heavy exposure to financial, energy and telecommunications. The fund invested quite heavily with 14% cash left only. The fund suffers more than other because it was launched much earlier in July 2007 which I believe they are stuck with higher price stocks.



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2. China Titan Fund

The fund launched in May 2008. It still has about 36% cash, it can afford to invest very slowly over a period of time. It has outperformed the benchmark by 12%, fund -25 vs benchmark -37% owing to higher level of cash. We can split hair saying the underlying stocks have performed much worse than benchmark but for consistency sake, let's use NAV or book value to evaluate its performance. This is a classic case that you outperform benchmark by simply doing nothing. Let's say a fund manager turn all the cash into gold(preserving wealth), can we also say the fund manager is not doing his/her job? The fund has a different strategy compared to China Select Fund, they have higher exposure in Taiwan and also European stocks that will benefits from China growth.



There are pro and cons in each fund. China Select might catch up much faster if China stocks are rising fast due China stock market recovery. China Titan fund will rise slower as a good chunk of Taiwanese and European stocks are tied to global equities sentiments. However, slow and steady will be more suitable for passive buy and hold investors.

If I want to be a bit more adventurous, I can play with concentration strategy, OSK-UOB Big Cap China Enterprise fund will be an interesting place to park money. 1-year NAV return is -25% with 16% cash, it's quite respectable. They bet pretty heavily on top 5 with almost 7.5% per position, it's quite aggressive by industry standard. The fund will do well during fast recovery but it may also fall hard when things fall apart.