Invesco Greater China Equity E EUR Acc

Analyst Report
Morningstar's Take

by Chloe Qu
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.

On 31 July 2023, Mike Shiao stepped down from his role as portfolio manager of Invesco Greater China after leading the strategy for 15 years, with Raymond Ma taking over. While we recognize Ma as a seasoned investor, we have reservations about the team’s instability and need more time to assess how Ma would work with the Invesco team to implement his process effectively. As such, the strategy continues to earn Average ratings on both the People and Process Pillars.

Incoming portfolio manager Raymond Ma is an established portfolio manager and a Greater China veteran with 23 years of experience. Prior to joining Invesco as CIO of China and Hong Kong in April 2023, he spent 15 years at Fidelity, where he has built a strong long-term track record on Fidelity Greater China, which he managed between July 2012 and March 2021. Ma came across as a passionate investor and impressed us with his deep knowledge and familiarity with the Greater China market. That said, we remain watchful of the supporting team’s stability and resourcing. The Invesco Asia ex-Japan team has lost eight Greater China portfolio managers and analysts since 2021, and its Greater China dedicated resources have shrunk to nine members compared with 12 two years ago.

The strategy will remain bottom-up driven and growth-oriented, but Ma brings his own investment process, focusing on companies with strong growth and cash flow generation ability. In contrast to Shiao’s approach, which focuses more on established companies with sustainable growth, Ma has a broader definition of growth and is flexible in allocating the portfolio among sustainable growth, higher growth, underappreciated growth, and turnaround opportunities. Ma also expects to run a more-diversified portfolio of 40-80 names compared with the previous range of 30-60, with lower expected tracking error and active share. This is the same investment philosophy and process that Ma previously applied to Fidelity Greater China, which has yielded strong long-term results. However, the success of this flexible approach heavily depends on Ma’s investment savvy and the supporting team’s research quality. Given the recent team turmoil and Ma’s short working history with the team, we need to closely monitor the effectiveness of the process’ execution and take a cautious stance on the strategy for now.
Morningstar Medalist Rating™The new manager and investment process have yet to be tested at the new firm.
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Morningstar Pillars
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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