Star China Fund Manager Falls Prey to This Year’s Worst Trades

One of last year’s hottest Chinese stock fund managers has turned into one of this year’s worst, as bets on the nation’s technology and education plays soured amid regulatory crackdowns.

E Fund Asia Select, a Qualified Domestic Institutional Investor equity fund, is down 29% from a February peak, ranking near the bottom among funds of its type in the past six months, according to data from financial website East Money Information Co. Its units are trading near the lowest level in a year, while most of its equity-focused peers have started to rebound from recent weakness.

The 3.1 billion yuan ($478 million) fund is overseen by Zhang Kun, who rose to stardom last year as another of his funds nearly doubled thanks to bets on baijiu alcohol makers. Those investments have also turned south recently, as Chinese stocks have underperformed on concerns about valuations, liquidity and regulatory moves.

Star China Fund Manager Falls Prey to This Year’s Worst Trades

As a QDII, E Fund Asia Select mainly invests in Hong Kong-listed stocks and American depositary shares of Chinese companies on behalf of mainland investors. The BNY Mellon China ADR Index is down 12% this year, while the Hang Seng Index is up 5.5%, compared with gains of more than 10% each in U.S. and global benchmarks.

E Fund could not immediately comment on its performance when contacted by Bloomberg.

Tencent Holdings Ltd., Meituan, Inc. and Alibaba Group Holding Ltd. account for a total of 41% of E Fund Asia Select’s holdings. The internet giants are all down more than 20% from recent highs amid probes by antitrust watchdogs into alleged monopolistic behavior and a national drive to rein in an “unbridled” expansion of capital.

The fund holds an 8.7% stake in TAL Education Group and 4.9% in New Oriental Education & Technology Group Inc., according to its latest filing on March 31. The pair are down more than 60% from this year’s highs due to a government crackdown on the online tutoring sector aimed at easing student workloads.

Zhang’s vehicle also has a 10% holding in Hong Kong Exchanges and Clearing Co., a direct play on the strength of the city’s financial market.

The recent slide in E Fund Asia Select has drawn fire on social media from Chinese investors, with one pledging to get out of “this bottomless pit”.

©2021 Bloomberg L.P.

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