CVA debuts “America-first” active China equities ETF

Oct 19th, 2023 | By | Category: Equities

Core Values Alpha (CVA), an offshoot of investment advisor MSA PowerFunds, has made its ETF debut with the launch of an actively managed Chinese equities fund.

CVA debuts “America-first” active China equities ETF

The ETF provides exposure to a China growth strategy while remaining true to American values.

The Core Values Alpha Greater China Growth ETF (CGRO US) targets China-domiciled companies from high-growth sectors. The fund may invest in Chinese A-shares, Hong Kong-listed securities, and American Depository Receipts (ADRs).

CVA employs a 15-member team of investment analysts stationed in China whose main task is to identify firms with the potential to outperform the broader Chinese equity market.

In addition to China-listed companies, CGRO also allocates to US-listed companies with significant revenue exposure to China.

“To adequately narrate the China growth story, we have to include American companies for whom China constitutes a major revenue source,” explained Ben Harburg, Portfolio Manager at CVA. “The emerging duality in Chinese and American tech companies offers investment opportunities in both markets.”

CGRO primarily distinguishes itself from other China equity growth strategies through its “America-first” investment philosophy which is centered around upholding US national security considerations, American values, and the country’s economic and technological standing on the global stage.

Potential investment opportunities identified by CVA’s China-based equity analysts must undergo further scrutiny by CVA’s China Risk Board. Composed of specialists in China’s economy, defense, and politics – including ex-military generals and White House national security experts – the board vets each company based on exhaustive reports and insights drawn from their own expansive networks.

Furthermore, each company within the eligible pool is assigned a CVA China Risk Scorecard. This involves an in-depth due diligence process that examines supply chains, downstream customers, and an array of direct and indirect risk factors. These could range from a company’s contribution to the curtailment of civil liberties to connections with the Chinese military and susceptibility to US sanctions. These scorecards function as a comprehensive risk assessment tool, offering a snapshot of each company’s threat levels to US interests.

The fund management team integrates all data from the CVA China Risk Board and the CVA China Risk Scorecards to curate a final portfolio that offers potential alpha-generating exposure to China while remaining true to American values.

Harburg added: “There is no ‘next China’. While there are certainly other emerging markets poised for significant growth in years and decades ahead, none have the scale, organization, and drive to return the quantum of alpha as China. Rather than seeking to replace China, investors should rethink the vehicles through which they are attaining China exposure, reweighting toward those that are actively managed and carefully navigating the landscape of China risks to ensure that American interests are not compromised. These are no doubt complicated times to be investing internationally, but it is our belief our investors will be the beneficiaries, rather than the victims, of geopolitics.”

The ETF is listed on NYSE Arca with an expense ratio of 0.75%.

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