Why is it important to meet management companies and managers on their own doorsteps?
Plenty of Asian and Japanese fund managers promote their funds by visiting London so it is possible to meet them in our offices – something we do on a regular basis. Doing so, however, often doesn’t give us the full picture and actually visiting the region and seeing the economy in action is a great way to get a clearer perspective and pick up on local views.
It is also key to meet other people working behind the scenes on the funds in which we invest (or are considering) on your behalf. Alongside every fund manager there is usually a team of analysts rolling up their sleeves and researching businesses in order to identify investment ideas. This bottom-up work is key to a fund’s performance potential and really getting to know what makes the broader team tick, and crucially, work together effectively, is key.
How do investors on the ground view the prospects for the region?
Over the course of a hectic five-day trip, we visited both Hong Kong and Singapore, meeting 17 fund managers and seeing 22 analysts. It is always interesting to talk to local investors and mostly they were upbeat in their assessment of the future prospects for Asian economies and markets. Importantly, there was a real and growing sense that confidence across the region was picking up and a feeling that its fortunes were less dependent on global growth than has historically been the case.
What are your views and how are the portfolios positioned?
Last year was one in which Asia and the emerging markets were among our favoured markets – a stance that proved positive for the performance of our portfolios. Heading into 2018, that remains the case with valuations still looking reasonable – especially relative to areas like the US – and many companies appear to be in good shape and well-positioned for the future. In terms of underlying holdings, we have selectively increased exposure to a number of our favoured managers and funds, where appropriate.
“It is also key to meet other people working behind the scenes on the funds in which we invest (or are considering) on your behalf.”
What are the prospects for growth in Asia?
In years gone by an investment in funds accessing China and other Asian countries largely meant investing in exporters selling goods around the world. As the region has developed that has changed and investing in an Asian fund can now be much more about tapping into themes like the growing spending power of an expanding and increasingly affluent middle class.
With prospects for economies in the region increasingly driven by internal factors, it is important to consider how the likes of China are faring domestically. Lower borrowing and a reduction in government stimulus means that it does seem likely that China’s economy will slow a little but evidence suggests that it will still grow in the region of 6 to 6.5% in 2018. On a global perspective, this is still an impressive number.
What are your thoughts specifically on Japan?
We have liked Japan for a while and still believe it to be attractive from an investment viewpoint. Prime Minister Shinzo Abe was re-elected in October 2017 – a sweeping victory that signalled a continuation of his program of economic and corporate reforms. Many companies are increasing their focus on effectively managing their finances and prioritising the needs of their shareholders, something that is evident in rising dividend payments. As investors, we naturally think this is good news. Additionally, many shares look reasonably valued and the domestic economy is continuing to strengthen.