China Active Fund Watch September 2020: Alpha after Healthcare Sector Correction

Investao Limited > Insight > China Active Fund Watch September 2020: Alpha after Healthcare Sector Correction

Topic: Under the impact of market volatility and the correction pressure, active healthcare equity funds in China have seen a wider performance gap.

Author: InvesTAO Research

Summary

  • In Q3 the Chinese healthcare sector experienced a market correction after leading the YTD performance among sectors with a significantly higher capital net inflow. The market correction was mainly induced by a certain degree of valuation difference relative to other industries.
  • Experienced healthcare portfolios managers maintain a bullish view on the sector mid to long term. They particularly like companies with a clear business model and confirmed a comparative advantage.
  • Actively managed healthcare funds, though underperformed against the benchmark in Q3, have maintained their outperformance against the general equity fund market by a large margin.
  • Some fund managers’ incompetency of weathering through a market downturn has been exposed. The YTD return from the top-performing active healthcare fund is 78% higher than the bottom one. As such, selecting the right manager in the right sector under the wrong time is critical when trying to generate Alpha.

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