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Leveraged China ETF propels Montero to victory in Fund Picker Competition

Montero achieved a total return of 41.37% on his portfolio of eight funds from April 2014 to April 2015. The showpiece of his portfolio is the Direxion Daily FTSE China Bull 3X ETF Fund, a leveraged fund on the Chinese equity market. The fund took full advantage of the rally in Chinese equities following the launch of the Shanghai-Hong Kong Stock Connect earlier this year and delivered a staggering 130.2% return over the competition period.  

The best of two models

The above-mentioned fund was only one of four China-focused funds selected by Montero. “I’m a fan of China, it has the best of two models. I believe in their macroeconomic policies,” he told Expert Investor Europe, referring to the typically Chinese form of state-led capitalism.

Table: The 10 funds which performed best

 

“A year ago, the valuation of China’s equity market was unsustainable in my view. It was valued as if the economy would grow by 0.5%,” he said.  According to Montero, the recent Chinese equity rally (equity prices doubled from July 2014 to April 2015) was just a catch-up play. “The market is now fairly valued,” he believes.

Steady returns for Icelander

The runner-up in the competition, Birgir Stefansson, also comes from one of Europe’s smallest countries: Iceland. While Montero achieved the best overall return in the competition, the Icelander composed the best balanced portfolio. All of the eight funds he selected delivered him a return of more than 30% in local currency terms. His total portfolio returned 39.28% over the period. The fact that most of the funds he picked are priced in dollars only makes this performance look more impressive. The Icelander’s fund selection talent has not only been noticed by Expert Investor Europe. Stefansson, who used to work for the LSR state pension fund in Reykjavík, was poached by EFG asset management to join its fund selection team in London Last December.

 

The portfolio composed by Stefansson has a strong tilt towards US and global equity growth funds. “I picked some global equity growth funds mainly for two reasons. The first was the benign economic outlook for the US, and the second was the relatively small valuation spread between growth and value companies. This made me expect that growth would outperform value,” he says.

Birgirsson also had a preference for quality stocks, a combination which he found in the only European equity fund he selected, the Jupiter European Growth Fund, which returned him 30.58% over the period. “Jupiter is a growth manager who does well when expensive [quality] stocks outperform cheaper stocks,” the Icelander explains.

The Icelander’s best performing fund was the Stryx Global Growth Fund, delivering 50.86% over 12 months. The unprecedented performance of this fund delivered Montero the second spot in the competition, with an overall performance of 35.01%.

Last year’s winner Rico Bosma finished fourth with a total return of 32.52%. Participants fared considerably better this time than in the previous edition of the competition, when Bosma’s total return of 25.83% proved sufficient to win by an 11 percentage point margin to the runner-up.

Part of the Bonhill Group.