Investments  

Fund Review: Baring Asean Frontiers fund

This article is part of
Fund Review: Frontier markets

This $399m (£257m) fund from Barings was launched in August 2008 and is managed by SooHai Lim. It is an Investment Adviser 100 Club 2015 member, representing frontier markets funds in the Specialist Sectors and Assets category. Mr Lim invests in companies in the Association of Southeast Asian Nations (Asean) region.

He notes the fund’s objective is to achieve long-term capital growth by investing in firms that he believes will benefit from the economic growth and development of the region.

Mr Lim explains the equity investment teams share the philosophy of quality growth at a reasonable price (Garp). “We believe that long-term earnings growth is the driver of stockmarket performance, and that the best way of finding unrecognised growth is to identify quality companies with visibility of earnings across three to five years,” he says.

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Firms with well-established business franchises, proven management and strong balance sheets generally curry favour with the manager. “We regard these companies as higher quality as they provide transparency and stability of earnings and share prices, thereby reducing portfolio volatility and making it possible to forecast long-term earnings growth more accurately,” he notes.

“Our analysts are tasked with identifying high-conviction opportunities. We have incorporated a more focused and in-depth approach to evaluating and scoring firms by introducing a company scorecard to structure and streamline the process, placing greater emphasis on each company’s franchise, balance sheet strength, valuation and quality of management.”

As a bottom-up investor, the focus is on the prospects for individual companies, with country and sector weightings decided as a result of that. Mr Lim says: “In the past 12 months, we have increased the active share of the portfolio to reflect our conviction levels as part of our process enhancement. This was achieved through reducing the number of small holdings, as well as big benchmark names whose growth or quality were less attractive.”

Unsurprisingly, for a fund that invests in equities in the Asean region, it sits at the riskier end of the risk-reward spectrum at level six out of seven, while the ongoing charges for the clean I-accumulation share class are 1.34 per cent.

Mr Lim admits that the Asean region has performed “poorly” this year due to a combination of external and domestic factors. “The fund delivered negative returns given the challenging environment,” he points out. “However, performance was ahead of the benchmark due to strong stock selection across most markets, particularly Thailand, Malaysia and Singapore. Our exposure to frontier markets such as Pakistan and Vietnam also helped.”

FE Analytics shows that in the 12 months to September 17 the fund lost 15.4 per cent, while the MSCI South East Asia index fell 18.2 per cent in the period. Across five years the vehicle’s performance is in line with its benchmark, with Mr Lim delivering 3.5 per cent against the index’s gain of 3.1 per cent.

“Asean hospital stocks have done well generally given their defensive growth characteristics, notwithstanding high valuations,” he says. “Specifically, our holdings in Indonesian private hospital operator Mitra Keluarga delivered strong absolute returns.