Our investment process includes the following key qualities.
Multi-factor analysis
Ever since the inception of our first fund in 1999, the diversification of sources of excess return has been an essential element of our investment process. Mark Pearson has developed a proprietary multi-factor approach to evaluating investment candidates and has honed it over more than 20 years of practical application. This model is used to evaluate and measure past returns and, in turn, feed back into ongoing investment decisions as well as portfolio level analysis.
Direct dialogue which avoids the “noise”
Our portfolio holdings and candidates for inclusion are researched on a rigorous and proprietary basis. This includes access to and regular dialogue with management. External research is referenced but not relied upon. By being detached from the hubbub of the investment community and driven by value rather than price momentum, we are less influenced by conventional opinion and able to find undervalued investment opportunities ahead of the crowd.
Macro analysis
We are fortunate to have Peter Tasker, a leading strategist and commentator on Japanese and Asian economies, as one of our co-founders and an integral part of the team. His insight ensures that our fund managers are aware of the wider issues that may influence their investment decisions and timing.
Experience
In Mark Pearson, we have a head of portfolio management who has been studying value opportunities in the region for over three decades. Having him at the helm ensures that our investment methodologies are neither rash nor ill considered. The vast majority of our investment team has more than a decade’s experience analysing or managing assets in Asia.
Our stock selection and portfolio construction combines rigorous fundamental analysis with quantitative factors.
Research
Our analysts track earnings and balance sheet information as well as corporate newsflow in order to identify compelling companies that can create long term value and are trading at a discount to fair value. Our research activities include:
- In-depth analysis of annual reports and quarterly filings
- Regular meetings with senior management
- Bottom-up analysis of a company’s fundamentals, management and industry trend
- Consultation with industry contacts and sector analysts
- Identification of catalysts that may unlock value and reduce valuation discounts
Portfolio Construction
Risk Management
All our portfolios are monitored daily by our internal risk system, which generates risk estimates on a position by position basis and for the portfolio as a whole.
Diversification is the key element of risk control. The prospective risk impact of every trade is considered prior to it taking place. Our approach towards sizing positions is based on an estimate of the contribution that each position will make to portfolio risk relative to that position’s expected return, rather than on an even distribution of capital across a number of investments. The resulting portfolio will typically be reasonably well diversified across different industries.
Risk data is shared daily across the whole investment team in order to keep a close eye on portfolio risk and evaluate any prospective changes to the current portfolios. The following metrics are reviewed every day for soft breaches outside of preset limits: total volatility, active long position, leverage (on long-short portfolios) and estimated beta. Any soft breaches are flagged immediately and promptly brought back within the agreed soft limits.