In the past six months Mr Series has launched two unconstrained Asian equity funds, called Freestyle and High Yield. Both are concentrated funds of stocks picked on a bottom-up basis without particular reference to the index.
Robin Geffen, investment chief at Neptune, also believes in applying the unconstrained approach to Asian equities. Neptune recently launched a focused Chinese fund, which is also managed without regard for the benchmark.
Kim Catechis, investment director, Asia and emerging markets, Scottish Widows Investment Partnership, said he was “sanguine” about returns in Asia. “We think returns this year will be in high single numbers. The earnings estimates for Asian companies are lower this year, but there are pockets where you will get mid double digit growth.”
He admitted that “China is the biggest conundrum for us this year” but said he was “cautiously optimistic” on the country. “The availability of transparent data is not perfect, so it’s hard to know what is going on. Different streams of data point to different arguments. We do see China slowing down, but in a relative measured way. China has been growing at a rapid rate. We don’t expect a hard landing but we are not expecting an entirely soft one either.” A key factor is that banks are beginning to pull back lending and give credit less freely.
UBS could also be described as cautiously optimistic on Asia, announcing last month a new Asia fund with a device aimed at “mitigating potential volatility in the Chinese equity markets”. The bank has launched a seven-year structured note that invests in the Baring Hong Kong China fund while guaranteeing a minimum return. Kheim Do, head of Asian equities at Baring Asset Management, said: “We are at the beginning of a second industrial revolution in China.”
John Freng, consultant at Greenwich Associates, said he put investors’ liking for Asia down to reasonably modest inflationary pressure and the strength of Asian currencies against the US dollar. “The investors we speak to are hoping for performance of at least 11 per cent in Hong Kong, Singapore, India and Korea – and probably also Taiwan. They are still positive on China but less enthusiastic because there are still concerns about corporate governance and transparency.” One third of the investors surveyed by Greenwich expected returns of up to 20 per cent.
RM
See Manager Survey, pp 22-28
