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GAM China Evolution Equity

GAM China Evolution Equity aims to generate long-term capital growth by actively investing in companies in China. As China evolves into a consumer- and innovation-driven economy, the fund focuses on picking attractively-valued stocks in consumer, technology, healthcare and financial services. Stock selection is driven by manager Jian Shi Cortesi’s in-depth knowledge of Chinese economy and companies.

Active Thinking Video

Jian Shi Cortesi notes that weak sentiment in China is keeping Chinese equities at very low valuations, due to the soft economic growth, real estate drag and the ongoing China-US rivalry. However, she is optimistic about long-term prospects, with the conviction that in the long term earnings growth will drive stock prices.

We continue to see many of our portfolio companies delivering good earnings results. Some of these have been so far ignored by the markets and are not yet reflected in the price, but we have also seen some stocks react positively to the earnings growth.

Our Edge

Deep China expertise

The manager’s in-depth knowledge of China’s economy and companies is key to successful stock picking, as market trends can evolve more quickly than in developed markets.

Differentiated stock picking approach

The manager has developed a series of ‘winning stock patterns’ from investment thought leaders’ time-tested Western approaches, and invests in Chinese stocks that fit one of these ‘winning stock patterns’

Large network of local contacts

Communication with customers, employees, suppliers and competitors offers the manager insights not covered by conversations with company management teams or analysts.

Mitigation of downside risk

The manager’s tactical use of low-beta stocks supplements high-conviction growth and value stock picks within the portfolio and helps protect on the downside.

Investment Team

GAM China Evolution Equity is managed by Jian Shi Cortesi, Investment Director. Jian has been a fund manager of Asia / China equity at GAM since 2010 and has 19 years’ professional experience in China, the United States and Switzerland, including 17 years in the investment industry. Jian is supported on the fund by Fanwei Zeng, Investment Analyst.

Jian is part of GAM’s Global Equity team, which comprises eight investors averaging 22 years of investment experience. The Global Equity team is led by experienced investor, Mark Hawtin, who has 37 years’ investment experience as a fund manager and has demonstrated long-standing, differentiated performance in the global equity space. The wealth of expertise across the team provides a broad forum to exchange expertise, knowledge and alpha maximisation across multiple portfolios. The team currently manages approximately USD 2.5 billion of assets.

The Global Equity team is part of GAM’s broader Equity team, which meets regularly to discuss ideas and portfolios and manages in excess of USD 7.5 billion in fundamental equity.

As the fund’s manager, Jian is ultimately responsible for research, portfolio management and trading decisions, and the first line of portfolio risk management. Two additional layers of independent risk oversight are performed by GAM’s risk teams.

Our edge lies in our ability to combine deep China expertise with a Western-style stock-picking approach.
Jian Shi Cortesi, Investment Director
Jian Shi Cortesi
Investment Director
Fanwei Zeng
Investment Analyst

Philosophy and Process

Investment Philosophy

The manager’s philosophy is founded on the belief that the next evolution in China’s economy will be driven by Chinese consumers. As the state continues to strategically transform the economy to be more consumer-driven, ‘new economy’ sectors will develop and prosper while old, heavy industries will become less important growth drivers. The manager identifies themes related to China’s evolution towards a consumer- and innovation-driven economy and invests in companies positioned to benefit in the coming years. She believes local knowledge and insights can add significant value and generate consistent returns in all market conditions.

Investment Process

The process starts by identifying attractive sectors in the Chinese economy in which to invest. Subsequently, the manager conducts bottom up stock picking in these sectors through applying time-tested Western investment approaches to Chinese equities. In particular, the manager screens for companies that fit into the ‘winning stock patterns’ framework. Fundamental analysis, company visits and valuation modelling result in a list of stocks which the manager believes offer an upside potential >30% over 12-24 months. Stock weightings are based on conviction and risk considerations. If not enough attractively-valued stocks are found, low-beta stocks are added to mitigate downside risk. She monitors risk factors continuously and adjusts the portfolio when risk parameters exceed acceptable levels.

1

Stock screening

  • Universe screened by growth, value and quality factors
  • Growth and value stocks identified for in-depth analysis
2

Company analysis

  • Blend of fundamental analysis, company visits and valuation modelling
  • Selection of stocks with more than 30% upside potential over 12-24 months
3

Portfolio construction

  • High-conviction and lower-risk stocks sized at 3-4%; other stock picks sized at 1-2%
  • Low-beta stocks are typically from telecoms and utilities sectors
4

Risk management

  • Downside protection, factor exposure, tracking error and stock correlation
  • Scenario analysis focuses on exposure to macro events and liquidity risk

Reasons to Invest

Focus on China’s growth drivers

Companies in consumer-driven sectors not only generate faster earnings growth, but also typically exhibit low levels of debt, due to their strong cash flow generation abilities.

Increasingly accessible

The on-going addition of China’s A-shares in MSCI benchmark indices paves the way for increased inflows into China from overseas investors and further integrates China’s domestic stock markets into global capital markets.

Alpha generation

The higher inefficiencies of Chinese equity markets, and lower quality of broker research than in developed countries, can result in mispriced stock opportunities for active managers.

Strong performance

The fund has generated strong outperformance over the MSCI China Index since inception, and won the Lipper Award for the best China fund over three years (2017).

Key Risks

Currency Risk

The value of investments in assets that are denominated in currencies other than the base currency will be affected by changes in the relevant exchange rates which may cause a decline.

Liquidity Risk

Some investments can be difficult to sell quickly which may affect the value of the Fund and, in extreme market conditions, its ability to meet redemption requests.

Currency Risk - Non Base Currency Share Class

Non-base currency share classes may or may not be hedged to the base currency of the Fund. Changes in exchange rates will have an impact on the value of shares in the Fund which are not denominated in the base currency. Where hedging strategies are employed, they may not be fully effective.

Market Risk / Emerging Markets

Emerging markets will generally be subject to greater political, market, counterparty and operational risks.

Single Country Risk

Investment in companies of a single country may be subject to greater political, social, economic and tax risks and may be more volatile than investments in more broadly diversified funds. Local tax law may change retrospectively and without notice.

Special Country Risk / China

Changes in China’s political, social or economic policies may significantly affect the value of the Fund’s investments. China’s tax law is also applied under policies that may change without notice and with retrospective effect.

Equity

Investments in equities (directly or indirectly via derivatives) may be subject to significant fluctuations in value.

Onshore Renminbi Currency Risk

Currency control decisions made by the Chinese government could affect the value of the Fund’s investments and could cause the fund to defer or suspend redemptions of its shares.

Shanghai-Hong Kong Stock Connect / Shenzhen Connect Risk

The Fund may be investing in China A Shares via the Shanghai – Hong Kong Stock Connect / Shenzhen Connect which may entail additional clearing and settlement, regulatory, operational and counterparty risks.

Capital at risk

All financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed.

Credit Risk / Structured Products

Should the counterparty to a structured note default, the value of those structured notes may be nil.

Our Thinking

Active Thinking
Active Thinking: China’s economic evolution beyond stereotypes
20 February 2024

Jian Shi Cortesi, Investment Director, Asia/China Growth Equities, delves into the intricate dynamics of Chinese and Asian equities. She focuses on the impact of manufacturing shifts, India’s emergence and the potential parallels with Japan’s economic trajectory.

Active Thinking
Active Thinking: The Great Call of China
12 December 2023

China is not without its problems, but, given the sheer scale of opportunities, warrants far more than peripheral market status for equity investors, argues Jian Shi Cortesi. She believes investors should look through the lingering anti-China haze and instead focus on the powerful longer-term growth story.

Outlook 2024
Outlook 2024: Jian Shi Cortesi (Asia/China Growth Equities)
December 2023

Asia & China Growth Equities – An exciting market with mispriced opportunities

Our Thinking

Fund Information

Contact Us

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Speak to one of our client directors

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Contacts

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GAM Multistock - China Evolution Equity is a sub-fund of Gam Multistock, registered office at 25, Grand-Rue, L-1661 Luxembourg, an umbrella investment company

Disclaimer: Past performance is not an indicator of future performance and current or future trends. The indications could be based on figures denominated in a currency that may be different from the currency of your residence country and therefore the return may increase or decrease as a result of currency fluctuations. Capital at risk: all financial investments involve an element of risk. Therefore, the value of the investment and the income from it will vary and the initial investment amount cannot be guaranteed. Any reference to a security is not a recommendation to buy or sell that security.

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