Quantifeed launched a model portfolio for investors looking to capitalise on "the biggest macro-economic story of the century."
A 21st century replication of the famed Silk Road, the China-led Belt and Road Initiative will involve the construction of ports, warehouses, and connections to overland transport in strategic locations, and the construction and upgrading of rail-networks.
Comprising land and maritime trade routes connecting China with Central Asia, South East Asia, Australia and New Zealand, the Middle East, Africa and Europe, the overall infrastructure investment is expected to reach US$900 billion though only a fraction of this has been pledged so far.
Quantifeed's Belt and Road model portfolio consists of Chinese companies that will directly benefit from the BRI, including large businesses in the areas of infrastructure development, transportation infrastructure construction, renewable energy development and distribution, and non-residential building construction.
Further, those selected companies must derive a significant proportion of their revenue from countries other than China; have a positive return on equity; a market capitalisation over CNY500 million; and daily liquidity of CNY50 million.
"The strategy provides access to Chinese companies that are at the heart of this multi-year initiative. Our systematic stock selection process identifies the companies that will benefit from the Belt and Road initiative and provide investors with exposure to the likely growth associated with this theme," Quantifeed senior quantitative strategist Gaudi Schneider said.
Stocks considered in the portfolio are inverse volatility weighted which often results in improved performance, and the index-composition and weighting is reviewed semi-annually, Schneider added.
Quantifeed senior executive for strategic partnerships Graeme Brant said the creation of the Belt and Road model portfolio was in direct response to its clients looking to offer engaging investing thematic alternatives to their own clients.
"In this case specifically, we are addressing our clients' request to make available a portfolio designed to capture the growth opportunity of what's possibly the biggest macro-economic story of the century," Brant said.