Ask The Experts: How This Singapore Equity Fund Builds Its Portfolio
Jan de Bruijn, Head of Asian Equities at Lion Global Investors, speaks to Fundsupermart about his outlook for Asian equities and explains certain investment decisions behind the LionGlobal Singapore Trust Fund.
What is your outlook for Asian equities in 2012?
- Outlook for Asia remains correlated to what is happening globally
- On a macro basis, the US is showing signs of recovery with lower unemployment and higher growth
- Europe is stabilised at the moment but there is still a lot of outstanding issues with regards to countries such as Portugal, Spain, and Italy etc
- China has recently announced their future long-term growth rate to be 7.5% and a shift for the economy to be less dependent on investments and more on domestic consumption
- Politics will also play an important role in Asia as there are many important elections taking place around the world
- Valuations of Asian equities are still looking very attractive at about 1 standard deviation below their historical average
What do you think are the major performance drivers for Asian equities?
- Stable global growth required in major economies such as US, Europe and China
While the fund has a strong long-term track record, it did not perform as well as its benchmark, the MSCI Singapore Index. What are the main reasons for the underperformance?
- Bullish on Singapore due to attractive valuations and recovering earnings
- Fund select stocks with a macro overlay and does not take sector of style bets
- Focus on stocks that the team thinks will help the fund's performance going forward
How much consideration is given to the benchmark when investment decisions are made?
- Fund's performance is measured against a benchmark and so the team is aware of how the benchmark is doing and the fund's positioning relative to that
- Fund is not a benchmark hugger but an active fund management house focused on stock picking
- Fund is able to take significant bets within stocks that are not necessarily benchmark names
On the fund's latest factsheet, it appears the fund has 72.6% of its portfolio invested in its top ten holdings. Approximately how many positions does the fund hold at any one time?
- Fund holds about 30 stocks on average
- The fund's benchmark, the MSCI Singapore Index, has about 67% in its top ten holdings so the fund is not unreasonably overweight in this respect
- This reflects the fund's high conviction allocation to certain stocks that they really like
- For now, the fund is currently favouring the banking sector and the offshore marine sector and this will show in the fund's top ten holdings
The financial sector is the fund's largest sector position at 43.2%. What are the reasons for the strong conviction in the financial sector?
- The benchmark, MSCI Singapore Index, has a larger allocation to the financial sector at 46% hence the fund is in fact underweight the sector
- The financial sector comprises banking and property
- The fund is overweight the banks and underweight property
- The banks are trading at PB ratios around 1.2 to 1.3 which is attractive on a historical basis
- Loan growth is also expected to continue and net interest margins are expected to improve over 2011
- More cautious on property sector due to headwinds facing the industry
- Government measures and more supply coming onto the market over the next 2 to 3 years are causes for concern for the property sector
- However, fund is not completely underweight the property sector as the team thinks that these concerns are already priced in and the valuations of these property companies are also very attractive
||23 April 2012
||Ask The Experts: How This Singapore Equity Fund Builds Its Portfolio