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Foundations of Dedicated China Allocations: Part 4
May 6, 2024
How were certain dedicated China funds able to earn double-digit annualized returns from 2021 through 2023 amid a tumultuous and generally poorly performing China equity market? Motivated to learn more about the drivers of excess returns in the China equity market, our research has culminated in a three-layer framework designed to help investors who have adopted, or are considering adopting, a dedicated China allocation. Investors transitioning to a total portfolio approach, even without a dedicated China strategy, may find the framework useful to bring transparency to a macro- or micro-based investment thesis on China exposures.
A framework to understand unique return drivers in the China equity market
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Foundations of Dedicated China Allocations: Part 1
In the first of our “Foundations of Dedicated China Allocations” series, we discuss investment policy and asset allocation as investors think through setting up such a program.
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In the second installment of “Foundations of Dedicated China Allocations,” we focus on configurating and implementing a dedicated China program.
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We present a framework to analyze market-capitalization-weighted indexes’ role in setting equity-risk-premium and capital-market expectations. It breaks return drivers into dividend yield, sales-per-share growth, profit margin and valuation change.
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