Celebrating 5 years of the RBC China Equity Strategy

Jan 29, 2024

The RBC China Equity Strategy (the “Strategy”) has marked five years since its inception in November 2018. Over this time, the Strategy has outperformed both its primary benchmark, the MSCI China Index, and its secondary benchmark, the MSCI China All Shares Index, demonstrating a strong track record supported by the RBC Asian Equity team’s robust and consistent investment philosophy and process.

In our 5-year anniversary piece, we discuss:

  • Why the asset class provides a compelling long-term opportunity: as the world’s second largest economy and the biggest contributor to global growth, China’s equity market provides investors with access to an enormous opportunity set.
  • Capturing alpha through active investing: China’s market depth (with a listed universe that now exceeds that of the U.S.) and high dispersion of stock returns over the medium to long term, mean that opportunities to unearth alpha are plentiful for stock pickers in the region.
  • A disciplined investment approach, ‘on-the-ground’ advantage, and industry expertise: holistic due diligence forms a key part of our process, supported by frequent trips, in-person meetings and site visits, as well as ongoing communication and channel checks.
  • Why now is the time to invest: we believe the near-term risk reward looks exceptionally compelling. China’s market is under-owned by foreign investors, valuations are near historic lows, and the government is set to take further action to help revive the property sector.

Moving into a new year, we are cautiously optimistic that things are falling into place for a rebound in China, but looking further ahead to the next five years, possible macro events such as wars, global inflation, technology disruption and numerous other factors mean that the trajectory for both China’s and the global economy are hard to predict.

However, in this time frame, China will continue to be a significant contributor to global growth. We believe that our focus on selecting strong, durable businesses positions us well to capture this growth and weather various market cycles, ultimately generating sustainable alpha and absolute returns over the long term.

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