|Our process has been developed following our own research into the dynamics of the Asia ex-Japan small cap universe plus experience of managing Asian equities since 1993.
Our interest in smaller capitalisation stocks is due to their under-researched nature. As active managers we believe we are more likely to be rewarded by concentrating our efforts on stocks that are under-researched and thus likely to be mispriced. We believe in the potential for positive total returns from investing in Asia ex-Japan small cap stocks over the long term.
We put great emphasis on what we pay for a stock and the qualities of a company that we get in return for what we pay. Put simply, we aim to invest in cheap stocks where there is a reasonable probability of positive change (whether endogenous or exogenous to the company) to unlock the cheapness. We pay great attention to the appropriateness of a company's balance sheet and its ability to generate cash flow. We are attracted to persistent dividend payments.
While we are long-only investors, we take a conservative approach to portfolio construction, with the aim of avoiding extreme outcomes and permanent loss of capital. We do not hedge against market risk or use cash levels deliberately to vary exposure to the market.
We do not construct our portfolio with reference to any index. However, our benchmark index is used as an ex-post measure of opportunity cost for our approach.
While we monitor macro-economic and country/currency factors to provide context for our investment decisions, our portfolio is built primarily at the stock level.
We have created our own templates and checklists for every element of our process. This ensures the consistency and repeatability of the process and creates a common language for the team.