Gartmore China Opportunities Fund

Faz

Hi guys

I'm still relatively new to Investments, I took out an Abbey multi manager fund a few months back through work but have started to look at other funds.

I've noticed the Gartmore China Opportunities Fund has done exceptionally well over the years:

http://www.h-l.co.uk/fund_research/fund_performance/sedol/3186093.hl

My main question is.. why has it performed so well and what indications are there for the future? I'm thinking of investing maybe £1500 into the fund. As a young student on a placement year I have a little money to invest and I guess I can afford to take a few risks too.

jamesd

Can you afford to have your investment fall to 20% of its value and take five years to recover? What goes up can and sometimes does go down by as much and that's one of the highest risk funds there is.

China and emerging markets in general have been booming due to many years of growth and a booming world economy. That fund will probably continue to do well as long as this continues. The US is having some economic troubles. It's China's main market.

You can reduce the risk by instead going for an Asia-Pacific fund or further still with an emerging markets fund (that adds Africa, Europe and South America to the package).

You can also reduce the risk by putting some money into other sectors - say a generic global growth fund or if you don't go for emerging markets, by adding an emerging Europe fund.

It's worth comparing the Abbey multimanager fund you have to others in the same sector. The chance that it's near to being the best is very low.

Have a look at Trustnet and follow its links from the fund to the other funds in the same IMA sector.

If you haven't read it yet I suggest that you read Ok then - How do I choose a S&S ISA to get an idea of what sector allocation is and how you can do it with amounts of a few hundred pounds at Hargreaves Lansdown.

Aegis

Faz wrote: »

My main question is.. why has it performed so well and what indications are there for the future? I'm thinking of investing maybe £1500 into the fund. As a young student on a placement year I have a little money to invest and I guess I can afford to take a few risks too.

Do you have any savings? If not, and if this is your sole source of emergency money for if things go really wrong at some point in the next few years, then consider a cash ISA instead of an investment. It might not have earned as much over the last few years, but if that China fund drops to half its value over the next few months, you'd still get over 6% tax-free interest every year on your cash savings by sticking to your realistic risk profile.

My thoughts are that as a student, you probably don't have that much money to spare (I know I didn't!) so it really might be worth keeping most of what you have in cash until you graduate and get yourself some long-term job, some emergency savings, some accommodation, and a fair bit of excess cash.

Consider this carefully before you decide to invest, but if you do decide to, remember that an investment like you're considering is usually going to be a 5+ years commitment if you want the best returns out of it in the long run. You should be absolutely sure that you can live without this money for that long at least before you decide to go with this.

dunstonh

China funds have the potential to lose 70% in a year. So, are you willing to put all your eggs into that basket?

wombat42_2

China is a risk - but there is also huge potential. Most commentators believe that China will have prodigious growth for the next 10 years plus.

But UK equities are also a risk and I would suggest that the risk is only a tad less than China equities and certainly less potential.

I think that standard IFA guidance that you should stick at least half of your equity investments in UK equities to avoid currency fluctuations is rubbish and also dont put more than 5% in a single country. Well isnt the UK a single country ? And China is soon set to become the world's biggest economy?

I have a big wodge saved in Cash savings (enough for years of rainy day money) but my equity investments are so called "high risk". I have a big wodge of equity ISAs in an Asian Pacific Fund an a big wodge in pension funds split betwen Gartmore China Opportunities and JP Morgan Natural Resources.

I think these so called "high risk" investments are well worth while as 10 year plus investment. I wouldnt have any more confidence in UK equities doing any better during that timeframe.

However I firmly agree that you shouldnt mess with any equities unless you have a solid cash buffer for rainy day money, and you should be prepared to leave equity investments there for 5 years minimum and preferably 10+.

Faz

I'd like to say thanks for all the advice in this topic, I'd love to respond to individual comments, but have read all of it thanks.

China does seem to be a booming market, my dad thinks that it will continue to grow for at least 7 years.

Interestingly I saw a huge advert for the Gartmore fund at Birmingham New Street Station about 18 months back with the heading "Invest in the worlds No. 4 economy before it becomes the worlds No.1". Had I have invested back then I'd have doubled my money!!

After taking the risks and the ability to live with losing my whole investment into consideration, I've decided to put £2000 into the fund. Without risk there cannot be reward.. I'm sure the Chinese market isn't about to collapse anytime soon and I can't see the UK markets giving anywhere as good returns.

wombat42_2

I think you have done the right thing considering you have only invested a small amount. But as i said, you must be prepared to invest long term and have a decent cash buffer.

Currently it is looking good for Gartmore China Opportunities. China is the only market in the world that has been barely unscathed by the global turmoil of the last few days. It went down by puny 0.10% on Friday !!! The China market has been rocketing by about 10% per week in the last few weeks. Actually Gartmore China Opportunities mainly invests in Hong Kong not mainland China, and has been hit in a small way by the global turmoil but still far less than, say, UK equity.

carnet

Faz wrote: »

I've noticed the Gartmore China Opportunities Fund has done exceptionally well over the years

You are aware that Gartmore lost its long standing manager of this fund, Phillip Ehrmann, to Jupiter, some months ago - although his replacement, Charlie Awdry, seems to have done well over the short-term (albeit in a rising market) ?Philip EhrmannPhilip Ehrmann

wombat42_2

carnet wrote: »

You are aware that Gartmore lost its long standing manager of this fund, Phillip Ehrmann, to Jupiter, some months ago - although his replacement, Charlie Awdry, seems to have done well over the short-term (albeit in a rising market) ?Philip EhrmannPhilip Ehrmann

This is not accurate. Awdry took over management of Gartmore China Opportunities in June 2006 (over a year ago) . He was also in the Gartmore China Opportunities team for years before that.

In the last year, Awdry's Gartmore China Opportunities fund has out performed Ehrmann's Jupiter China fund.

dunstonh

To be honest, I think you would be happy with either. Personally, I have Gartmore China opps but I had it when there were no other china specific funds. So, didnt have a choice. I have no intention of changing it to one of the others.

wombat42_2

dunstonh wrote: »

To be honest, I think you would be happy with either. Personally, I have Gartmore China opps but I had it when there were no other china specific funds. So, didnt have a choice. I have no intention of changing it to one of the others.

Yep I go along with that. It's just that Carnet's post sounded unnecessarily skeptical about Gartmore China Opps.