During the same period, the MSCI China index gained more than 40% in sterling terms, with growth companies outperforming their value counterparts.<\/p>\n
Performance of MSCI China, MSCI China Growth and MSCI China Value indexes over year ending August 2025<\/p>\n
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Source: FE Analytics<\/p>\n
Dan Coatsworth, investment analyst at AJ Bell, said: \u201cWhen Chinese retail investors are feeling bullish, they have shown a tendency to place bets on more risky areas of the market in the hope of making it big.<\/p>\n
\u201cWe have seen elements of this behaviour in 2025 as investors bid up a range of stocks \u2013 the more the market has gone up, the greater their appetite to chase certain stocks.\u201d<\/p>\n
As noted by Xiadong Bao, portfolio manager in international equities at Edmond de Rothschild Asset Management, most of the best-performing funds across the sector over the past 12 months are tech-centric and biased to small- and mid-caps, which are also typically more volatile.<\/p>\n
\u201cThese are subject to more positive inflows from domestic mutual funds and retail investors,\u201d he explained. \u201cWhile the large-cap tech names are strapped in the quick-commerce subsidy war and have underperformed.\u201d<\/p>\n
![\"\"](\"https:\/\/www.newsbeep.com\/ie\/wp-content\/uploads\/2025\/09\/20250911_china_table_1.png\")
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Source: FE Analytics<\/p>\n
As shown in the table above, Invesco ChiNext 50 UCITS ETF<\/a>, in particular, delivered supersized gains for investors this year, making a 93.6% total return over the assessed period against 51% volatility.<\/p>\n The ETF is a \u201cposter child for high-growth Chinese stocks\u201d, according to Freddie Gabbertas, investment manager and emerging markets and Asia lead at Arbuthnot Latham, who remarked that it was therefore \u201cno surprise\u201d to see the fund top the performance list.<\/p>\n \u201cThe ETF\u2019s top 10 holdings have an average price-to-earnings ratio of 58x \u2013 far above the broader China equity market\u2019s average of 13x \u2013 highlighting the extent to which the rally has been driven by highly valued growth stocks,\u201d he said.<\/p>\n These top holdings include global manufacturer of optic modules and subsystems Eoptolink Technology and Chinese battery manufacturer Contemporary Amperex Technology.<\/p>\n Baillie Gifford China<\/a> is another strong performer this year, logging a 46.2% total return, although it has not been for the risk-averse, with 29.5% volatility.<\/p>\n The fund, which has been co-managed by Sophie Earnshaw since 2014 and Linda Lin since 2024, has further demonstrated its volatility over three, five and 10 years, managing a 2.4% gain, 14.7% loss and 151.9% gain respectively.<\/p>\n It has \u201creaped the rewards from clever stock picking\u201d, according to Coatsworth. \u201cIts biggest holding is Chinese tech firm Tencent, whose shares have continued to push higher.\u201d<\/p>\n Tencent recently reported strong earnings growth and has shown the benefits of deploying artificial intelligence (AI) in its business, thus providing the kind of narrative that Chinese retail investors have been looking for, he noted.<\/p>\n However, while the most volatile funds dominated the top of the performance table, investors did not necessarily have to take on the highest levels of risk to see strong returns.<\/p>\n In fact, several funds in the third quartile for volatility also delivered top-quartile performance, with returns spanning 43%-51%.<\/p>\n Source: FE Analytics<\/p>\n With 25.7% volatility, Matthews China<\/a> managed a 51% total return over the assessed 12-month period. The $20.4m fund is also one of the most consistent, remaining in the first or second quartile for total returns over one, three, five and 10 years \u2013 managing a 136.1% gain over the decade.<\/p>\n The fund is managed by Andrew Mattock, alongside deputy managers Winne Chwang and Sherwood Zhang, with top holdings stretching across tech firms and financials, including China Life Insurance Company and online shopping platform Meituan.<\/p>\n Meanwhile, Matthews China Discovery<\/a> \u2013 also managed by Mattock and Chwang \u2013 had a slightly lower volatility (24.7%) and return (43.3%) over the assessed 12-month period, which nonetheless marks a strong improvement. It languished in the fourth quartile among peers for total returns over three years and five years, losing 8.4% and 15.7% respectively.<\/p>\n The $109.8m fund invests around two-thirds of its net assets in small companies located in China, defining such companies as those with a market capitalisation under $5bn or the largest company in the MSCI China Small Cap index.<\/p>\n Its comparatively weaker longer-term performance compared to Matthews China is likely driven by this heightened small-cap exposure.<\/p>\n There were also strong performing funds to be found among the least volatile in IA China\/Greater China.<\/p>\n Source: FE Analytics<\/p>\n The biggest return by one of the least volatile funds was delivered by Redwheel China Equity<\/a>, with 16.4% volatility and a 43.6% total return \u2013 beating Matthews China Discovery.<\/p>\n However, despite the strong 12-month performance, the $18.5m fund made an 8.5% loss over three years and a 6.2% loss over five years.<\/p>\n Similar to other funds in the sector, its holdings are dominated by familiar large-cap names such as Tencent and Alibaba, alongside innovative tech-driven companies like electric car manufacturer NIO.<\/p>\n![\"\"](\"https:\/\/www.newsbeep.com\/ie\/wp-content\/uploads\/2025\/09\/20250911_china_table_2.png\")
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