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Apart from the Govett Safeguard fund, the Hong Kong sector tracked by Standard & Poor's Micropal shows that all Hong Kong funds have provided negative returns over one year. Over three years, a more meaningful picture emerges in which the likes of Barclays ASF, HSBC's GIF and boutique players like Value Partners can demonstrate respectable results despite the downturn.

A look at the different in-vestment methodologies il-lustrates the need for establishing a fit with the preferences of the plan sponsor. For instance, Barclays Hong Kong Fund is run according to a model created for the entire regional asset allocation process. The manager is obliged to include the core stocks but is free to decide their relative weightings. The fund is aggressively managed with 100% turnover pa likely and with the top 10 holdings accounting for more than 50% of assets.

Contrast this with the ap-proach of Dresdner RCM which relies upon a total re-turn philosophy, taking little account of benchmark in-dices when constructing the portfolio. Gartmore's Capital Strategy Hong Kong & China fund aims to beat an internally devised benchmark comprised equal parts the Hang Seng and the China 'H' Share Index. It has a higher than average weighting in 'H' shares, but avoids China 'B' shares because of low liquidity and an absence of reliable research.

At HSBC, investment chief Man Wing Chung will typically have no more than 40 stocks as he prefers to take significant bets on stocks he favours, though he won't de-viate more than 30% from the sector or stock weightings within the index to reduce risk. Jardine Fleming are the classic bull market managers and the JF Hong Kong Trust typifies the group approach. The style is pure stock picking with no formal restrictions on the degree of divergence from the sector weightings. Gearing is permissible up to a total of 25% of total assets and will be used when the market circumstances are favourable.

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