China: How Our Investment Approach Travels

CASE STUDY

While opinions about China vary, one thing is certain – there is a lot of change taking place there. Now the world’s second-largest stock market, China has experienced a booming middle-class population (with hundreds of millions more to join over the next decade) and a dramatic jump in gross domestic product over the past 20 years. Chinese businesses have reinvented themselves over this time, making remarkable quality improvements and taking a total stakeholder approach. While outside investors may see this level of economic success as unsustainable, at Burgundy, we believe there is still significant potential for the region.

In this educational video series, Investment Counsellor Rachel Davies speaks with Portfolio Manager Ching Chang for an exploration into the country. Ching shares learnings and expectations for this market by expanding on its potential tailwinds, commenting on the associated risks, and providing insight into what makes it a compelling opportunity for long-term quality/value investors like Burgundy.

The transcript has been edited for clarity.

Video #1: The Current Landscape & Opportunity

Rachel and Ching highlight the pace of change in China, offering insight into Chinese companies and the differing approaches to analyzing them.

Video #2: Lessons Learned from Burgundy’s Extended Research Trip

In 2018, in a move that changed how Burgundy thought about the country, the Emerging Markets team embarked on an extended research trip to live in China for six months. Rachel and Ching reflect on the trip’s key lessons and explore how their learnings continue to inform the team’s investment decisions.

Video #3: Burgundy’s Edge

Rachel and Ching discuss how retail trading dominates China’s stock market and explore the ways a long-term focus helps investors stomach the region’s volatility.

Video #4: Navigating the Risks

Despite the headlines to the contrary, you may be surprised that the business landscape and management principles in China share a lot of commonalities with other countries. Rachel and Ching address the risks of investing in the region, share how Burgundy’s approach helps to mitigate concerns around regulation, and offer insight into why research is essential to understanding this area.

Video #5: Analyzing ESG Factors in China

At Burgundy, our approach to analyzing environmental, social, and governance (ESG) factors is one of integration. We believe this improves our ability to manage risk, allows us to make better investment decisions, and ideally enhances our returns over the long term. Rachel and Ching discuss Burgundy’s approach to ESG analysis in China and why we look to invest in companies that are seeking to benefit all stakeholders.

Video #6: The Burgundy China Fund

Rachel and Ching offer an insightful look into the Burgundy China Fund, highlighting how its portfolio companies act relative to their Western peers and using Burgundy’s quality/value perspective to comment on expectations.

Ching Chang

Ching Chang, CFA

Vice President,

Portfolio Manager

Rachel Davies

Rachel Davies, CFA

Vice President,

Investment Counsellor


This post is presented for illustrative and discussion purposes only. It is not intended to provide investment advice and does not consider unique objectives, constraints or financial needs. Under no circumstances does this post suggest that you should time the market in any way or make investment decisions based on the content. Select securities may be used as examples to illustrate Burgundy’s investment philosophy. Burgundy funds or portfolios may or may not hold such securities for the whole demonstrated period. Investors are advised that their investments are not guaranteed, their values change frequently and past performance may not be repeated. This post is not intended as an offer to invest in any investment strategy presented by Burgundy. The information contained in this post is the opinion of Burgundy Asset Management and/or its employees as of the date of the post and is subject to change without notice. Please refer to the Legal section of this website for additional information.

Securities of the Canadian pooled funds managed by Burgundy will not be sold to any person residing outside Canada unless such sales are permitted under the laws of their jurisdiction. Burgundy provides investment advisory services on a discretionary basis to non-Canadian persons and investors where permitted by law. Prospective investors who are not residents of Canada should consult with Burgundy to determine if these securities may lawfully be sold in their jurisdiction.

Regarding distribution in the United Kingdom (UK), the content of this communication has not been approved by an authorised person within the meaning of the UK Financial Services and Markets Act 2000.  This communication is provided only for and is directed only at persons in the UK reasonably believed to be of a kind to whom such promotions may be communicated by an unauthorised person pursuant to an exemption under article 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005.  Such persons include (a) bodies corporate, partnerships and unincorporated associations that have net assets of at least £5 million, and (b) trustees of a trust that has gross assets (i.e. total assets held before deduction of any liabilities) of at least £10 million or has had gross assets of at least £10 million at any time within the year preceding this communication.  This communication is not intended for, nor available to, any organization that does not meet this criteria, or to whom it may not be lawfully communicated.  Any such organization must not rely on this communication, whatsoever.

Please note that from January 6 2020 to December 31 2020, this fund (the Burgundy China Fund) was incubated under the name of “Burgundy China Plus Fund” and did not charge a fee as it was not available to external clients. While the fund’s investment team, investment objectives, strategies, and investment philosophy are consistent and remain the same, its past performance during the incubation period is not indicative of potential future returns since its eligibility for external investors, fee charges, and the asset size could have affected decision-making processes and investment behavior.

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