FSSA China Growth I USD Acc |
Morningstar's Take
|07/02/2025by Claire Liang
| The strategy continues to benefit from a topnotch Greater China equity investor and a time-tested investment approach. We maintain the strategy’s People and Process ratings of High. Morningstar has enhanced the way we assess alpha opportunity for funds, which is a key component in our Morningstar Medalist Rating calculation. More of this strategy's Medalist Ratings than usual may therefore change with this update even in the absence of changes to pillar ratings or fund costs. Lead manager Martin Lau is a Greater China equity expert. He boasts nearly 30 years of investment experience and has led this strategy for more than two decades. He is a savvy investor and has consistently impressed us with his in-depth investment knowledge and a passion for investing. His stellar track records across his managed strategies further attest to his investment capabilities. Lau is supported by a 13-member investment team, which experienced seven departures in 2024. Three of the leavers were Japan-focused; they were dismissed following the team’s decision to shut down its Japan equity mandates. The team also lost four India-focused members, including the highly experienced Vinay Agarwal. Senior member and Asian equity manager Richard Jones also retired in January 2025. We are keeping a close eye on the broader team’s stability and resourcing, although we think this China strategy remains well-supported, with nine team members contributing to Greater China equity research. Lau applies a teamwide, bottom-up investment approach that aims to identify quality companies with capable management teams, durable business models, and strong competitive advantages that can deliver consistent earnings growth and shareholder returns. The team emphasizes management quality, which results in the exclusion of most state-owned enterprises from the portfolio. They also tend to avoid cyclical firms with weak pricing power and persistently low returns, leading to perennial underweightings in the energy and materials sectors. Instead, the portfolio has a long-standing bias toward consumer-related companies, healthcare, and industrials firms in the automation and robotics space. Other trademarks of the process are its absolute return focus, low portfolio turnover, and benchmark-agnostic approach. The strategy has an impressive track record of beating the Morningstar China TME Index Morningstar Category benchmark and its peers over the long term under Lau’s leadership. The focus on quality and capital preservation has yielded strong downside resilience in the past, such as in 2018, 2021, and 2022. That said, the strategy can lag during momentum-driven rallies, and it can also struggle when markets favor lower-quality and cheaper stocks, as evidenced by its dismal showing in 2023 and 2024. Nonetheless, we continue to think highly of Lau’s investment savvy and the tried-and-tested investment process. |
Remains one of the best quality-growth plays in China equity, though we are closely monitoring the broader team’s stability. To find out how Morningstar rates a fund click here.
| Morningstar Pillars | |
| People | High |
| Parent | Average |
| Process | High |
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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