Feature – China
China is something of a new frontier for institutional inves- tors. And for those with the knowledge and understanding of the country, it has been so for some time. It continues to grow in so many ways, offering investment opportunities aplenty along the way. But where, given the size of its economy, are the best opportunities for investors to exploit? For local government pension pool Border to Coast, which has a big focus on the country, healthcare appeals. “The healthcare sector is an exciting part of the Chinese market,” says Luc Pas- cal, assistant portfolio manager. “At a high level, the sector is supported by two key tailwinds, an ageing population and increasing healthcare spend per capita. “These positive macro forces, along with a culture of innova- tion, should prove supportive for prolonged revenue growth – as well as being positive at the social level – with better, more accessible healthcare,” he adds. Pascal notes that despite positive tailwinds for the sector, there will still be individual winners and losers. “For example, there may continue to be downward pressure on generic drug pricing
in an effort to reduce basic healthcare costs,” he says. “Under- standing the intricacies of the sector is very important.” China is so central to Border Coast’s approach that the invest- ment team re-adjusted its Emerging Market Equity fund to focus on the country. Of particular interest within this new concentration, are high-growth companies. “Carving out a standalone allocation to China was the culmination of a lot of thought and debate here at Border to Coast and with our part- ner funds,” Pascal says. “We believe there is scope to generate attractive levels of alpha in China, particularly in the domestic A-Share market, so we sought to reposition our fund to best capture that opportunity.” The changes made, have, thus far, showed promise. “Perfor- mance from our new China allocation has been encouraging so far,” Pascal says.
Building opportunities
Property is another area that offers vast investment opportunity. “We believe China is rich with opportunity, but there are also risks
CHINA: BEHIND THE HEADLINES
China has faced some upheaval but continues to offer investors huge opportunities – as long as they get to grips with some of the country’s complexities, says Andrew Holt.
42 | portfolio institutional | February 2022 | issue 110
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