In this article, based on the information provided by Sharing Alpha, the favourite Asian investment funds of the European fund selectors and advisers will be analyzed.
The Sharing Alpha initiative gives us the possibility to know the managers and the funds preferred by the European advisers and selectors. Fund selectors are asked to rate the funds based on their expectations based on three parameters (3 P’s):
- The experience and competitive advantage of the manager and his team (People)
- The costs of the fund (Price)
- The way the strategy is executed in terms of risk management (Portfolio)
|LU1378879248||Morgan Stanley Investment Asia |
|IE00B3NFBQ59||Federated Hermes Global Emerging |
Markets Equity Fund
|LU0511423146||Kotak Funds – India Midcap||India|
Morgan Stanley Investment Asia Opportunity Fund
Kristian Heugh, Head of the Global Opportunity Team and Co-CIO of Counterpoint Global
The investment team believes that strong stock selection is derived from long-term investments purchased at a large discount to intrinsic value. In our view, these long-term investments are best protected when they are sustainable with respect to disruption, financial strength and ESG externalities, and best enhanced when the underlying company has strong competitive advantages and growth that creates value.
Our investment philosophy is simple: Warren Buffett investment principles applied to growing companies. We believe that by applying a price discipline to investments in high quality companies – strictly defined as those with what we consider competitive advantages and long-term growth that creates value – we can best capture opportunities and manage risk for clients.
The investment team believes that the development of insights and big ideas is valuable to the investment process, whereas obsession over incremental “information” flow is not. In addition, they believe that value added investment results can be achieved more consistently through bottom-up analysis and judgment than through top down forecasting. Concentrating the portfolio in the best ideas, while maintaining reasonable diversification, is a way to potentially maximize the reward while reducing the risk of unknown variables. Finally, the team believes that guiding principles are critical to strong decision making, but that rigid decision making rules and dogma tend to undermine an investor’s effectiveness. Given that the market is generally efficient, we believe that investors must allow for some intellectual and process flexibility in the pursuit of attractive investments.
Federated Hermes Global Emerging Markets Equity Fund
Kunjal Gala – Portfolio Manager
Newswires are awash with articles from leading asset allocators opening the ‘great rotation’ with last years’ growth leaders giving way to value and cyclical companies as investors bet the Fed stimulus and vaccine rollout brings an end of the pandemic and normal economic activity closer to reality. Year to date, the MSCI Emerging Markets Value Index (+6.5%) has outperformed the Growth index (+2.9%) and our benchmark MSCI Emerging Markets Index (+4.7%) but the differential is more muted than most would expect. (as of 21 April 2021).
We adopt a blend style. We do not set out to buy either growth or value companies but seek to create and manage portfolios of future-proof companies that can tackle sustainability challenges as they arise. Since June 2020, in anticipation of a broadening global economic recovery, we have rebalanced our portfolio by reducing the overweight position in Technology, and recycling these profits to add into more value areas where we identify catalysts to rerate, such as Financials, while adding more cyclicality by raising our overweight exposure to Industrials. This has been achieved without compromising the overall quality or ESG.
Near term, the effects of the economic recovery (rising inflation) and record stimulus (rising yields) are now playing out. This environment should be supportive for risk assets. Although the rising global yields signal improving inflation and economic prospects, it becomes an issue for vulnerable economies. While some investors are worried that higher US rates might derail the EM growth story, we remain constructive for three key reasons:
- 1) It appears likely the Federal Reserve will manage policies and the path to higher rates to prevent an unwarranted premature tightening in financial conditions (unlike 2013),
- 2) EM macro-stability is on firm ground and most countries have managed to keep inflation dynamics and current account deficits in check,
- 3) The strong demand recovery, particularly in the US, should provide a more conducive external demand environment for emerging markets, boosting exports and kick starting a new capital expenditure cycle.
We retain our preference for Asia, given its limited macro vulnerability, over the Europe, Middle East and Africa (EMEA) region, which we regard as the most vulnerable emerging market region, and we continue to be selective in our approach to Latin America.
In the medium term, although global economies have been improving recently, we believe the outlook remains mixed. Significant risks remain, including the emergence of new COVID variants accompanied by periods of lockdown, the potential for fiscal stimulus to disappoint, or inflation overshooting expectations. Against this uncertain backdrop, we think it’s critical for emerging markets to pursue structural reforms to ensure sustainable growth.
On a sector basis, overall, we believe 2021 is likely to be good for select value sectors exposed to structural drivers such as financials (demand for credit, insurance) and materials (low-carbon economy). Longer-term, we do not see high economic growth rates continuing, so cyclicals remain more of a trade for 2021 than a secular investment. We believe secular trends like 5G, digitisation, cloud, Internet of Things, electrification, automation, increasing spending on health care, logistics, and premium products should continue, with growing demand from the emergent middle class.
Kotak India Midcap Fund
This fund, managed by Kotak Mutual Fund, aims to achieve long-term capital appreciation by primarily investing at least two-thirds of its total assets in stocks and equity-linked securities of mid-cap companies registered in India or deriving a significant portion of their business from India.
The fund is managed by Nitin Jain and Ankit Sancheti. Nitin Jain is one of the most popular managers at Kotak. Prior to joining the current corporation, he worked in the industry at companies such as SBI Funds Management, IDBI Capital Market Services and OFL Securities. A graduate in mechanical engineering from Government Engineering College, Jabalpur, India, he is also an associate member of the CFA Institute. Ankit Sancheti focuses on the management of growth strategies, especially in the mid-cap universe, and is also a member of the CFA Institute.