The fund’s investment strategy is long only equity which uses specific macro themes to drive a bottom up stock picking process in those particular themes. In analysing companies we are focusing on the business model, the quality of management (or lack of quality) and sustainability of the business. Particular attention is paid to free cash flows. Investment can be small, medium or large cap companies. However, a minimum of 75% will be in liquid large cap companies in the Asia Pacific region excluding Japan.
The portfolio is split between the core portfolio, which consists of companies that have sustainable and predictable growth to provide steady returns over the longer term (3-5 years), and the trading portfolio which will be short term in nature (up to 6 months) and will seek to capitalise on market inefficiencies and earnings momentum.
Our return target is to achieve long term growth of capital over and above the MSCI Asia Pacific ex Japan with lower volatility. Our investment horizon is long term and we are prepared to tolerate volatility in the short term, which is prevalent in the Asian markets.
Our philosophy is driven by the belief that we can deliver strong relative returns versus the benchmark by adopting a thematic approach to Asia and by focusing on the two main drivers of strong returns, dividend yield and earnings momentum. We will invest in a core portfolio of high dividend yielding stocks together with a trading portfolio which consists of earnings driven shorter-term opportunistic positions.
There are two important aspects of our investment philosophy. Firstly, we believe in the concept of total return, composing of dividend yield, earnings growth and currency appreciation. This concept looks at stock returns from a wholistic point of view. Our belief is that if one can derive a large part of expected return from dividend yield, it reduces the burden of EPS delivery and therefore reduces volatility of share prices which usually come from mismatch of earnings expectation with delivery.
Secondly, we believe that stock price movement under normal circumstances are ultimately driven by changes in earnings expectation. In our view, the absolute level of earnings growth is not important in that it would have already been discounted by the market. What drives changes in stock prices are changes in earnings expectations. We seek to identify earnings growth that has been materially under- or overestimated by the markets.
Market risk is hedged using exchange traded index futures and options. Foreign currency hedging is achieved via the use of currency forwards.
Long positions may be held through a combination of direct investment and/or derivative instruments.
- Pan Asian fund investing in equities in Asia excluding Japan
- Investment will be led by broad macro themes seeking to identify companies which will be subject to positive dynamics over the medium to long term
- Objective is to achieve long term growth of capital over and above the MSCI Asia Pacific ex Japan
- Fundamentally driven core portfolio focusing on investment ideas with a horizon of 3-5 years
- Short term trading portfolio seeking to exploit market inefficiencies and momentum
- Positions will be mostly in large cap companies although attractive opportunities in small and mid cap companies will also be pursued