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Bailie Gifford takes fresh approach to China

Baillie Gifford

Greater China Fund

Type: Oeic

Aim: Growth by investing in companies listed in China, Hong Kong and Taiwan and those listed elsewhere which derive their main revenues of profits from these regions

Minimum investment: Lump sum £1,000

Investment split: 48.67% China, 25.16% Taiwan, 19.17% Hong Kong, 7.01% cash

Isa link: Yes

Charges: Initial 5%, annual 1.75%

Special offer: Initial charge reduced to 3%

Offer period: Until August 28, 2009

Commission: Initial 3%, renewal 0.5%

Tel: 0800 917 4752

Baillie Gifford has made its greater China fund available to IFAs following its launch for institutional investors last November. The fund invests in a portfolio of 40 to 60 stocks in mainland China, Taiwan and Hong Kong.

Looking at how this fund fits into the market, Flowers McEwan director David Flowers says: “Baillie Gifford’s style suits this market well where some of the normal disciplines and regulations of investment simply do not apply.”
He feels that the company’s stock-picking and contra index philosophy may help it to mitigate the worst experiences of unorthodox market behaviour “The first few months have produced good returns – the fund is up over 50 per cent in six months – but not beyond what one would expect of a new launch into a buoyant market.”

He feels that the charges are standard and that the literature is unremarkable. “It shares the necessary information about their philosophy of investment,” he says.

Discussing the less attractive features of the fund Flowers says: “If you are after an exposure to what is a high risk, but with commensurately high potential returns, then there is nothing much against this product.”

He says that as Baillie Gifford is a relatively new entrant to the market, you could take the view that it will have the flexibility and freshness to continue with its outperformance for a while longer.

Identifying funds which are likely to provide the main competition Flowers says: “There are established funds with good long track records in the market.” In particular, he highlights Invesco Perpetual’s Hong & China, Fidelity’s South East Asia, First State Asia Pacific and Gartmore China Opportunities funds. “Baillie Gifford does have the newcomers’ advantage of flexibility and incoming cash flow, but it will not escape from the prevailing characteristic of all these funds, namely the high risk and substantial volatility.”

Summing up Flowers says: “Any recommendation for a China fund has to be hedged with risk warnings of course, but assuming those caveats are in place, this would be a good fund in which to dabble.”

BROKER RATINGS

Suitability to market: Good
Investment strategy: Good
Charges: Average
Adviser remuneration: Average

Overall 7/10

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