Bottom-up stock picking
Being aware of his benchmark means Chanpongsang will size his positions relative to the underlying index, in this case the MSCI Asia ex-Japan index (a benchmark-conscious UK manager may size their positions relative to the FTSE 100, for example).
As well as offering investors a broad-based, core exposure to the region, this investment style should result in limited volatility when compared with other strategies and help the fund perform well across market cycles.
But that doesn’t mean Chanpongsang is constrained to the benchmark. There are over 1,000 companies across the index – this fund features 85 at time of writing. It’s up to the manager to pick and choose where he sees the best potential to generate returns.
Chanpongsang is a bottom-up stock picker, meaning he looks at individual companies and their return characteristics. Boasting 25-years’ investment experience, over which time he has managed six Asian equity portfolios with Fidelity, Chanpongsang looks for stocks which are priced attractively relative to improving earnings. His is a strategy that tries to minimise risk by avoiding companies with weak balance sheets and questionable corporate governance.
That approach sees Chanpongsang have a slight lean toward the “growth” style of investing – i.e. companies which look set to deliver rising earnings long into the future, regardless of the economic conditions. Particularly he likes those that have established themselves as global leaders through technology, scale or cost structure, and offer strong franchises that benefit from long-term structural drivers. Large positions in well known technology names like Alibaba (often referred to as the Chinese equivalent of Amazon), Samsung and Tencent, are typical of this approach.
But he’s not willing to pay for growth at any price. The companies he invests in will often look cheap relative to their improving earnings. That gives his style the feel of a typical “special situations” fund, which looks to identify mispricings in the market. These may arise when the market is yet to realise a company’s long-term growth prospects, or because a business is undergoing some kind of turnaround.
This broad remit, combined with Chanpongsang’s awareness of the benchmark, means this is a fund well suited to investors looking for broad exposure to Asia, and to capitalise on the region’s fast accelerating growth potential.