Key points:

• Recently launched Legg Mason Singapore Opportunities Fund is an actively managed Singapore equity fund
• 1 year performance has outpaced most funds in the Singapore space
• Fund is led by Patrick Tan and Joseph Tern

One more fund enters the Singapore fund space and already it’s proving to be a strong contender. As at 26 November, the fund’s 1-year performance stands at a blistering 90% return, compared with the peer’s average of 75.58%. But the fund is still young, having been incepted in December 2007, and it remains to be seen if the fund will continue its red hot performance, or if it will give up its gains in subsequent years.

We spoke with Legg Mason Investments for a closer look at the fund.

iFAST: How long have you been managing the fund?
Legg Mason Investments (LMI): The current investment team has been managing the Fund since its inception.

iFAST: Tell us more about the team behind the fund.
LMI: The investment team is led by Patrick Tan (CIO) and Joseph Tern (Deputy CIO), each of them having more than 20 years of experience in covering Asian equities. There are 4 portfolio managers including Patrick Tan and Joseph Tern who cover specifically Asia-Pacific ex-Japan equities. Each portfolio manager is his own analyst and has both country and sector responsibilities, and each market has a primary and a secondary coverage person. In establishing this cross functional and overlapping structure, Congruix Investment Management (“Congruix” or “the Firm”) is able to achieve at least a two-dimensional perspective of any given investment proposition. This structure ensures a comprehensive coverage of stock, sector and country, in addition to promoting a healthy level of investment discussion and debate. This structure is highly conducive to Congruix’s conviction building process.

iFAST:  What is the fund’s investment mandate?
LMI: The Fund’s investment objective is to achieve medium to long term capital appreciation by investing at least 70% of its total asset value in securities issued by companies connected to Singapore through incorporation, domicile, listing or other economic interest.

iFAST:  What is your investment strategy?
LMI: Congruix’s investment strategy is to use a systematic and thematic approach in information gathering to analyse and capture periodic market mis-pricing where there are sufficient market signals and data points such as changes in consensus estimates, opinions of leading analysts, etc. for them to form investment insights. Congruix spends more of their internal research resources in seeking ‘out of favour companies’ and opportunities which have the potential to demonstrate longer term secular transformation. It is their thematic approach and deliberate focus on areas of material market inefficiencies that set them apart from their competition. The bulk of their excess returns are derived from investment themes that the team formulate at the stock and sector level as a result of the interaction between portfolio managers and analysts.

iFAST: In which market environments will the portfolio perform the best/ worst?
LMI: Congruix’s ability to outperform the market is dependent on the presence of investment themes. Over the multiple market cycles that Congruix has been managing money, the Firm has found that their performance tends to be top decile when the market exhibits clear thematic trends or when it is rich in stock picking opportunities. The Firm tends to under-perform the benchmark with median peer rankings when markets are directionless or lacking in investment themes, such as the year of 2008. However, similarly the reversal of this underperformance often comes in an equally strong fashion as seen with the year-to-date 30 September 2009 performance figures.

iFAST: Over a 1-year period, the fund has outperformed its peers. What has contributed to this?
LMI: Following from the above comments, many of Congruix’s investment themes have done well such as inventory depletion and their long-running theme of energy-related beneficiaries.