Morningstar

Invesco Greater China Equity A USD Acc

Analyst Report
Morningstar's Take
|13/09/2024
by Sam Hui
Invesco announced that Mike Shiao will relinquish his lead portfolio manager role on Invesco Greater China Equity effective 31 July 2023. He retains his role as CIO of Asia ex Japan and will focus on managing the firm’s Asia ex-Japan regional strategies and select Chinese equity portfolios. He will pass on the leadership of Invesco Greater China Equity to Raymond Ma, who joined Invesco in April 2023 as the CIO of Hong Kong & China. The upcoming manager change does not materially affect our overall view of Invesco Greater China Equity, which currently carries a rating of Average for both the People and Process Pillars.

Although Shiao’s experience will be missed, Ma is a strong replacement, bringing more than two decades of experience in Greater China equities. Prior to Invesco, he spent 15 years at Fidelity, where he managed the Fidelity Greater China, China Consumer, and Taiwan equity strategies. We have known him for a number of years from Fidelity Greater China, where he delivered robust long-term returns over his tenure between July 2012 and March 2021. We think of him as a well-rounded and skillful investor who has consistently impressed us with his knowledge over the years.

We expect Ma to bring a growth-oriented investment process that focuses on companies with strong growth prospects and cash flow generation. However, more details will only be available after he officially takes over.

Overall, while Ma’s appointment is sensible, we will need to closely monitor how he integrates with the team at Invesco, and we have ongoing concerns on the research team’s instability and lean resourcing. Along with some unknowns on the investment approach, we reiterate the strategy’s People and Process ratings at Average. We will undertake a formal review of the strategy for more clarity soon. In the meantime, the strategy continues to receive a Morningstar Medalist Rating of Neutral across all share classes.

 
Lead manager Raymond Ma is a seasoned investor, but we have reservations about the team's stability, and we remain watchful of the investment process' repeatability and efficacy. As such, the strategy continues to earn Average ratings on both the People and Process Pillars.

Ma's tenure here began on July 31, 2023, when he took over from Mike Shiao, who stepped down after leading this strategy for 15 years. Still, Ma is an established portfolio manager and a Greater China veteran with more than two decades of experience. Before joining Invesco as CIO of China and Hong Kong in April 2023, he spent 15 years at Fidelity, where he built a strong long-term track record on Fidelity Greater China between 2012 and 2021. Ma came across as a passionate investor and impressed us with his deep knowledge and familiarity with the Greater China market. He has the support of 10 dedicated Greater China portfolio managers and analysts at Invesco, but continued turnover in this squad gives us a pause. Notably, it has lost nine members from 2021 through July 2024, though most leavers were backfilled.

The investment approach remains bottom-up-driven and growth-oriented. Ma focuses on companies with strong growth and cash flow generation ability. He has a broad definition of growth and is flexible in investing across turnaround growth, high growth, underappreciated growth, and sustainable growth opportunities. The end portfolio contains 40-80 names, with an expected active share of 40% to 60%. While this approach is sensible, its execution by Ma has been fluid. Elsewhere, it has yet to translate into robust value-adds through bottom-up stock selection as intended.

The strategy has lagged the Morningstar Category index, the MSCI Golden Dragon Index, during Ma's first year in charge, in part hurt by the structural underweighting in Taiwan Semiconductor, though it beat the median peer. Overall, it's too early to conclude whether Ma can replicate his past success.
 
Morningstar Medalist Rating™Maintaining our neutral view.
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Morningstar Pillars
PeopleAverage
ParentAverage
ProcessAverage
 
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