HyungJin Lee says his £35m portfolio aims to deliver both capital appreciation and income in the long term by investing in quality growth companies in the Asia-Pacific ex Japan region.
The manager’s investment process is based on Garp (growth at a reasonable price), with particular emphasis on quality growth stocks, he reveals. “We are looking to take strong views and positions in companies with stable, sustainable long-term growth outlooks that are benefiting from the growth of not only Asia, but also global trends or growth sectors as well.”
Mr Lee employs a bottom-up process that relies on Barings’ research-driven approach. He acknowledges the use of screening and quantitative tools in selecting holdings for his portfolio, but he adds: “The primary focus will be going out meeting companies, understanding their business model and talking to management.
“Having said that we will be aware of macro conditions, especially as they pertain to the growth dynamics of the companies we are investing in. If we had a good firm that is perhaps in a volatile sector or market, then we would take that into consideration when we’re deciding whether or not to invest in this company.”
The manager runs a fairly concentrated portfolio of between 40 and 50 holdings and favours companies with predictable earnings streams, which he is finding in the healthcare and consumer consumption sectors.
He says: “We are open to all sectors but we find less of those types of names in cyclical sectors like energy, where the companies could have a lot of growth, but that growth would be dependent on the oil price or the oil price going up strongly. And since that is not something we can predict with great accuracy and it is not as sustainable or stable than other areas, we would generally find we’re not as active in those types of sectors.”
The fund sits at the riskier end of the risk-reward scale, at level six out of seven, with ongoing charges of 1.06 per cent applicable to the I clean fee share class.
Mr Lee’s fund has generated positive returns across three, five and 10 years. FE Analytics shows the vehicle delivered 98 per cent over the 10 years to February 25, slightly ahead of the Investment Association Asia-Pacific ex Japan sector average of 94.4 per cent, and the MSCI AC Asia ex Japan index’s 93 per cent gain.
The fund has suffered more recently, recording a 5.1 per cent loss in the past 12 months. But the manager points out: “We like to highlight – although we cannot deny it is negative – that [the fund] has done much better than the overall markets in Asia. In fact, we are one of the better-performing Asia ex Japan funds in the UK in the mutual funds space.”
A couple of holdings have done particularly well, including Airports of Thailand, which owns the country’s six international airports. Mr Lee elaborates: “One of the strong growth areas in Chinese consumption is travel and tourism. A significant portion of the population now has enough free time to start to travel overseas and one of their favourite destinations is Thailand. I often say, sometimes the best way to play China is outside of China.”
A more traditional consumption story in India has been the car industry, which Mr Lee’s fund also has exposure to through carmaker Maruti. “India is developing economically and so the ownership of cars is increasing. Maruti is one of the more competitive car companies in [the country] and has done well for us in the past year or so,” he says.
“I think we are relatively positive on the outlook for Asia in the long term, and I say that knowing there is a lot of volatility in global equity and financial markets.”
| VERDICT: Martin Bamford, chartered financial planner and managing director, Informed Choice |
| This fund invests in some interesting themes across the Asia-Pacific region, including infrastructure investment and domestic consumption, which tend to drive economic growth and market returns in this part of the world. We like the high-conviction approach of this fund along with the access to specialist managers who offer valuable local knowledge. Despite some poor short-term performance, the overall performance has been strong in the long term. |
Mr Lee thinks the growth in Asia is more “home-grown” as many Asian economies are not reliant on either commodity prices or financial stimulus, and he has positioned the fund to take advantage of that. He notes: “The growth is more what we would call organic, more sustainable in terms of it is the classic story of incomes rising. Therefore people can afford higher standards of living and there are companies [looking to] benefit from that.”
