The best funds in China in 2024

China equity funds have struggled in these conditions. But Morningstar analysts maintain a positive outlook on certain strategies, rating seven with the highest gold rating.

In September 2024, T.Rowe Price China Evolution Equity Fund and FSSA All China Fund led the pack of China equity funds with the best performances to date.

The best and highest rated funds in China

The data in this article comes from Morningstar Direct. To find the best performing funds, we looked at UK-domiciled Morningstar Medalist Rated funds with their base currency in sterling that invest in China.

This chart shows the volatile performance of China-focused funds since the beginning of 2024.

Here’s what Morningstar fund analysts think about the funds.

All China FSSA Fund

• YTD performance: -10.03%
• Morningstar Medalist Rating: Gold
• Equity Style Box: Great Shuffle
• Fund size: £57 million
• Morningstar rating: 4 stars
• Morningstar Category: China Equity

Over the past three years to September 2024, the FSSA All China Fund lost -37.33%, only underperforming the Morningstar China Index, which returned -36.25%. Year to date, the fund is also down -10.03%.

The fund’s top 10 holdings range from Tencent (TCEHY) to JD.com (JD), but the strategy favors smaller companies compared to the average fund in Morningstar’s China Equity category. The portfolio also moved away from stocks that pay dividends or offer buybacks.

The portfolio is overweight industrial and consumer defensive stocks, while underweight technology and consumer cyclicals. The fund was also awarded a High Process Pillar rating by Morningstar due to its risk-adjusted long-term performance.

FSSA Greater China Growth Fund

• YTD performance: -7.02%
• Morningstar Medalist Rating: Gold
• Equity Style Box: Great Shuffle
• Fund size: £395.8 million
• Morningstar rating: 4 stars
• Morningstar Category: Greater China Equity

Morningstar analysts support the FSSA Greater China Growth Fund despite its poor performance. Morningstar highlights the 28 years of experience of lead manager Martin Lau, who is described as an expert investor with a “stellar” long-term track record of investing in Chinese stocks.

However, this strategy has suffered due to its investment in consumer names being hit hard by weaker consumer confidence in the country. Tencent Holdings (TCEHY) and Anta Sports Products (02020) are two of the names in its top 10 holdings.

Over the three years to September 2024, the fund returned -27.39% versus the Morningstar China TME Index, which lost -32.74. However, over the past 15 years, the fund has returned 9.29% per year, beating the 7.24% gain of the MSCI Golden Dragon Index and outperforming 90% of its peers.

FSSA China Growth Fund VI

• YTD performance: -13.24%
• Morningstar Medalist Rating: Gold
• Equity Style Box: Great Shuffle
• Fund size: £1.6 billion
• Morningstar rating: 4 stars
• Morningstar Category: China Equity

Despite his recent performance, Morningstar analysts say leader Martin Lau is a veteran of China stocks with a good approach. With 28 years of experience, Lau applies a bottom-up investment approach that seeks to identify quality growth companies at reasonable valuations.

Avoiding low-value but lower-quality energy stocks and state-owned enterprises, Lau stuck with consumer names, but they themselves fell on concerns about weak consumer spending in China.

However, Lau remained constructive on China’s long-term consumer upgrade trend, adding companies such as China Mengniu Dairy (02319) and Anta Sports (02020) whose share prices look attractive.

Year to date, the fund has lost -13.24% against the Morningstar China TME Index.

Man Numeric China A Equity Fund

• YTD performance: -5.8%
• Morningstar Medalist Rating: Gold
• Equity Style Box: Great Shuffle
• Fund size: £10.1 million
• Morningstar rating: 5 stars
• Morningstar Category: China Stocks — A Shares

This portfolio is overweight stocks in basic materials, although its allocation to energy is like other funds in Morningstar’s China Equity category.

However, the fund has low exposure to the defensive consumer and industrial sectors. For Morningstar analysts, the industry experience of the management team has led to its high rating on the people pillar, while its portfolio investment philosophy is considered sound enough to warrant an above-average rating on the process pillar.

Over the three years to September 2024, the portfolio lost -31.17%, just beating the Morningstar China TME Index, which lost -32.74%. The fund also lost -5.80%.

Schroder ISF Greater China

• YTD performance: -5.88%
• Morningstar Medalist Rating: Gold
• Equity Style Box: Great Shuffle
• Fund size: £1.6 billion
• Morningstar rating: 4 stars
• Morningstar Category: Greater China Equity

Morningstar has awarded the Schroder ISF Greater China Fund a gold medal as it continues to benefit from the approach of veteran portfolio manager Louisa Lo.

Morningstar analysts believe Lo’s 30 years of experience make her one of the best fund managers in the Greater China Equity space. The fund has an upside bias with a preference for consumer and electric vehicle-related stocks. Lo also began holding positions in oil companies to better navigate China’s macroeconomic phases.

Over the past three years, the fund has returned -33.26% and YTD is down -5.88%. Morningstar puts this lackluster performance on Lo’s quality growth style, which has fallen out of favor during a value-oriented rally.

T. Rowe Price Funds OEIC China Evolution Equity Fund

• YTD performance: -3.02%
• Morningstar Medalist Rating: Gold
• Equity Style Box: Great Shuffle
• Fund size: £4.6 million
• Morningstar Rating: N/A
• Morningstar Category: China Equity

Compared to the Morningstar category, this fund is overweight real estate and underweight financial services and technology. The portfolio is skewed toward smaller, more growth-oriented companies. The holdings were more liquid than peers in the Morningstar category, but that made it easier for the fund to sell them during market downturns.

Unfortunately, since the fund’s inception in December 2021, it has not produced a positive rate of return, losing -37.70% against the Morningstar China Index, which lost -29.79. However, year-to-date the fund has only lost -3.02% against the index, which has returned -2.33% over the same period.

Schroder China A International Selection

• YTD performance: -2.33%
• Morningstar Medalist Rating: Gold
• Equity Style Box: Great Shuffle
• Fund size: £1.5 billion
• Morningstar Rating: None
• Morningstar Category: China Stocks – A Shares

Since March 2022, this fund has lost -35.84% versus the Morningstar China TME Index, which has lost only -10.35%. Despite the fund’s torrid performance, it remains one of Morningstar’s top picks for China A-share exposure. Senior Portfolio Manager Jack Lee has 25 years of experience investing in the space. The portfolio has become more diversified, with 60 to 70 holdings as of late 2020, up from about 50 names. Lee expanded holdings to deal with increased market volatility.

Morningstar analysts acknowledge that while this strategy has produced great results during Lee’s tenure, in the short term it has been severely damaged by the quality growth style, losing favor. Year to date, the fund has returned -18.25% versus the Morningstar China TME Index, which has lost just -2.33%.

Matthews Asia Funds — China A Share Fund

• YTD performance: -9.84%
• Morningstar Medalist Rating: Silver
• Action style box: high growth
• Fund size: n/a
• Morningstar Rating: None
• Morningstar Category: China Equity — A Actions

This fund is overweight in cyclical industrial and consumer stocks, although it has significantly low exposure to healthcare and financial services. The strategy also leans toward smaller, higher-growth companies compared to peers. The Silver Rated fund’s main holdings range from BYD to Sungrow Power Supply. From July 2022 to September 2024, the fund returned -37% versus Morningstar China TME, which lost -21.48%.

Abrdn SICAV I — All China Sustainable Equity Fund

• YTD performance: -10.63%
• Morningstar Medalist Rating: Silver
• Equity style cassette: Great mixing
• Fund size: £202.8 million
• Morningstar Rating: None
• Morningstar Category: China Equity

The strategy is managed by a team of four members with an average of 14 years of investment experience and 11 years of seniority between them. As part of its sustainability considerations, the strategy excludes at least 20% of the investable universe, with guns and tobacco kept out of the portfolio. However, the team is looking to invest in companies focused on quality growth in the China A-share universe. The team also looks for opportunities in both China’s onshore and offshore equity markets, and historically the onshore/offshore portfolio split has been largely on par with the benchmark.

Year to date, the fund has lost -10.63%, underperforming the Morningstar China TME Index, which has returned -2.33%.

JPMorgan Funds — China A-Share Opportunities Fund

• YTD performance: -11.5%
• Morningstar Medalist Rating: Silver
• Equity Style Box: Great Shuffle
• Fund size: £2.1 billion
• Morningstar Rating: None
• Morningstar Category: China Stocks — A Shares

Despite recent underperformance, Morningstar supports this fund thanks to lead portfolio managers Rebecca Jiang and Howard Wang. Wang is a Greater China Equity veteran with 29 years of experience and Jiang brings 19 years of experience. According to research analysts Morningstar, the duo has remained true to its growth-oriented approach even during the down times, with the portfolio showing a long-term trend toward technology, consumer, healthcare and emerging energy names.

The duo focuses on companies’ expected five-year return, taking into account the relative attractiveness of stocks, and can sometimes tolerate rich valuations if they believe in a company’s ability to deliver earnings growth over time. This has worked well in growth-driven rallies, but backfired during the recent sell-off in Chinese stocks, where some expensive stocks fell short of the growth team’s expectations amid weak Chinese consumer spending.

Year to date, the fund has lost -11.5%, underperforming the Morningstar China TME Index, which has returned -2.33%.