How Active Management Can Help in the Chaotic China Trade: $7 Billion Money Manager

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Active management may be one of the only ways to generate alpha from the turbulent China trade, one investor says.

Chinese stocks have whipsawed this week amid concerns that one of the country's largest property developers, Evergrande, could default on billions of dollars in debt.

Considering China's growing litany of risks — not just Evergrande, but also the regulatory crackdowns targeting the nation's technology, gaming and education companies — it's imperative to stay nimble in that market, Adviser Investment Management Chairman Daniel Wiener told CNBC's "ETF Edge" on Monday.

"I don't think you can index China right now," said Wiener, who manages $7 billion in assets. "You need to work with investment managers, portfolio managers with boots on the ground. That means using actively managed funds, not ETFs."

One such option exists at Vanguard, where Wiener is editor of The Independent Adviser, a monthly newsletter.

The Vanguard International Growth Fund, an open-ended mutual fund with a nearly 14% position in China, has outperformed Vanguard's Total China Index ETF year to date and in the last 12 months, three years and five years, Wiener said.

"They have people on the ground. They are making choices as to which companies to buy and which to avoid, and that makes all the difference," he said.

Either way, Evergrande's debt dilemma shouldn't have a major impact on global markets, DWS Group's Arne Noack said in the same interview.

"We obviously take the issue very seriously, and we look at all the implications," said Noack, his firm's head of systematic investment solutions for the Americas and the man behind the Xtrackers Harvest CSI 300 China A-Shares ETF (ASHR).

"Evergrande being one development company that is in trouble obviously is concerning to us, but we do not see this to be of broader systemic risk in China."


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