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Greater China Fixed Income Investing at Value Partners

REF ID : UST083
HBP Product : ST83
Case Author : Prof Chu ZHANG and Joni Coughlin
PublicAction Date : 02.07.2019

Abstract

The case is based on the fixed income investment team at Value Partners Group Limited (VP), a publicly-listed, Hong Kong–based fund and asset management company founded in 1993, focusing primarily on Greater China and Asian investments and following an investing approach referred to as value investing.

Set in December 2014, the cumulative returns from September to November 2014 for the Value Partners Greater China High Yield Income Fund (The Fund)—the firm’s flagship fixed income fund—were negative. The year had started out slowly, but momentum picked up in the summer until a number of external events affected returns, including: Occupy Central in Hong Kong; the market’s concern about the end of the US Federal Reserve’s quantitative easing; Chairman Xi’s anticorruption campaign in Beijing; and the Chinese property market suffering from excess inventory. Investors reacted to these events by pulling their money out of The Fund, and September returns for The Fund were down 2.2% for the month.

The December bond market movement was drastic enough that Gordon Ip, Fixed Income Fund Manager for VP, and his team needed to react. Ip was under intense pressure to increase performance, since December was the last month of the year and investors would more closely scrutinize his performance. He needed to make a decision.

Learning Objectives

After analyzing the case, students will be able to:

1. Understand the concept of value investing in the fixed income market and to establish the connection between value investing and convergence trading strategies.

2. Understand the investment environment in Hong Kong in terms of security market regulations.

3. Be familiar with Greater China’s high yield bond market.

4. Learn to use Bloomberg, Reuters, and other financial data services to gather various information about fixed income securities.

5. Get a better sense of how information drives asset prices.

Company/Organization Value Partners Group
Industry finance, financial brokerage
Major Discipline Finance
Subject(s) Income, Finance, Investments
Geography Asia Pacific region, Hong Kong, China
Case Nature Field
Page count of the Case 9
Teaching Notes 6
Publisher HKUST
Last Revision Date 19.09.2019