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Not All Asset Managers Fled China Tutoring

Which fund has been accumulating shares in TAL Education since May?

Kate Lin, CAIA 14 December, 2021 | 8:00
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After our analysis on fund holdings of e-commerce names, we are zeroing in on managers' activity in the education space.

In July, the Chinese government said all institutions with a school curriculum must register as non-profit organizations, challenging the profitability of private tutoring firms across the country.

The move from Beijing came after another announcement – the relaxation of the number of children couples can have, which is now three. Stripping after-school tutors to make a profit is an attempt to alleviate the cost of raising and educating children in China by making tutoring affordable for parents, to ultimately drive up the national birth rate.

The broader group of education companies, including names that provide after-school tutoring or vocational training, had a potential for growth, and as a result, many asset managers held large positions in the sector. That is not true anymore.

 

 

From Jan to Now

At the beginning of 2021, Greater China funds managed by JP Morgan, Value Partners, and UBS had varying levels of exposure to the sector.

UBS China Opportunities started the year with almost 10% assets in TAL Education Group (TAL), which was among the hard-hit after-school education providers. In July (the latest data available), the fund had 0.12% in TAL and 0.08% in New Oriental’s ADR shares.

In comparison, Value Partners’ portfolio hold multiple names that provide different levels of education services. Other than New Oriental and TAL, the fund also backed vocational institute China Education Group (00839), private higher education schools Hope Education Group (01765) and Minsheng Education Group (01569), and early-childhood education RYB Education (RYB). Its positions in New Oriental and TAL were completely offloaded by the end of the first and third quarters, respectively.

Compared to the UBS and Value Parnters funds, the JP Morgan fund started the year with a smaller exposure to education names, with over 1% coming from New Oriental Education & Technology Group (EDU, 09901). The manager sat on the same position and subsequently liquidated the entire holdings in May 2021.

 

But Wait. There’s a New Buyer!

Interestingly, FSSA Greater China Growth was the only medalist fund in this category that topped up exposure to TAL. Morningstar’s data shows that the manager started creating the TAL position in May 2021 and the fund held the stock at least through July. 

 

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About Author

Kate Lin, CAIA

Kate Lin, CAIA  is a Data Journalist for Morningstar Asia, and is based in Hong Kong

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