The No. 1 China Equities Fund Bought Only Three Stocks This Year

When Cederberg Capital’s Dawid Krige places a bet, he bets big.

The strategy has worked well for his little-known fund, whose 46 percent return in 2017 makes it the best-performing active fund investing in greater China equities, data compiled by Bloomberg show. That’s after buying only three stocks this year, and with just 10 names making up 70 percent of its holdings.

In a market where swings are notoriously large and gains can be dominated by a handful of companies, it helps to double down on your picks and sit tight. Two of Cederberg’s new investments this year were Tencent Holdings Ltd. and Alibaba Group Holding Ltd., which have both treated the fund well, jumping more than 70 percent.

“Good ideas are scarce,” Krige said in an interview from London. “It is easier to identify a wonderful company and own it for the very long run, especially in a place like China where there will be multi-year winners.”

The $158 million Cederberg Greater China Equity Fund has a solid track record, returning 159 percent over five years, the third-best among its peers investing in the region’s stocks. Cederberg is named after a nature reserve in Krige’s native South Africa, where he asked his then new wife to let him pour his life savings into creating a fund, in which the bulk of his net worth is still invested.

Cederberg only started buying Tencent and Alibaba this year, as well as Hong Kong-listed Beijing Tong Ren Tang Chinese Medicine Co., which hasn’t performed so strongly, rising less than 1 percent. With regard to the two Internet juggernauts, it’s better to be five years late than 10 years late, Krige said.

“They’re immensely dominant, so it’s very hard to see them getting disrupted,” he said. “The monetization opportunity is immense, and that is just talking about what we know today.”

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