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  • 07/05/2016

Pinebridge Soon’s human deduction approach key to risk mitigation for small caps


A Systematic Approach through The Pacific Rim

By Paul Lees

PineBridge likes to pause for breath and put things in perspective. This approach has helped it earn two Best-in-Class awards in the Professional Top 100 categories for India and Asia ex-Japan Small/Mid-Cap Equities.

“India offers many investment opportunities with a large number of companies expected to benefit from the high rates of economic growth in this evolving market,” explained Elizabeth Soon, Portfolio Manager. She continued, “To capture this growth at a company level, we follow a bottom-up stock selection process using fundamental research. Our approach is designed to systematically identify companies with strong business franchises, run by excellent management teams and available at fair valuations, to generate sustainable and predictable investor returns.”

A Viable Strategy

 Soon also noted that PineBridge has a robust investment process based on years of research experience in analyzing companies. This helps the portfolio to sustain itself during all phases of the market and is better able to cope with volatility as the firms it invests in are among the most robust. A strong investment team on the ground in India, which scans the marketplace for mispriced opportunities, works in close collaboration with the rest of its global investment team to allocate assets.

Moving on to portfolio risk, Soon commented that: “From our perspective, price behavior of stock or price volatility is not a risk. Instead, we see a drop in a share price as a potential opportunity. The risk for us, therefore, is a permanent loss of capital which comes from misjudgment of three factors namely business franchise, the management quality and its valuations. Plus, the uncontrollable, unpredictable effect of things such as inflation and tax treatment.”

“Secondly, our investment time horizon for holding a company in the portfolio also plays a vital role in determining the overall risk. If we were to buy a stock merely on the basis of news flow, with the intention of trading within a short period, which we do not, then the risk would increase,” she continued.

Soon concluded by explaining that: “These aspects of risk are covered in our robust and comprehensive equity investment process, which mitigates ad-hoc decision making and ensures discipline as no company can be bought in the portfolio if not researched or has been rated as a sell by one of our team.”

The Human Factor

Looking at the role technology plays in the stock research process and Soon observed: “No computer can replace what people can deduce,” then added, “most digital information is short-term in nature, so one needs to have a human intervention. This applies the right set of filters to determine what to take on and what to discard.”

“Equally important is our interaction with companies and consumers on-the-ground. For instance, over the last year, our team traveled almost 50,000 kilometers to get the first-hand feel of what’s happening on the ground.”

 A Non-Economic Event

A headline-grabbing event in 2016 was the Indian government’s decision to demonetize by withdrawing 500 and 1,000 rupee notes from circulation. In Soon’s opinion: “This was a ‘non-economic’ event, akin to banks replacing their customer’s credit cards when they are about to expire. The move gained an economic angle on account of delays in replacing old currency notes. We felt it was more of a social and governance re-engineering and there was no change in our portfolio or strategy due to this event.”

Aware but Not Constrained

Turning to PineBridge’s wider Asian strategy and Soon explained that with the Asia ex Japan Small Cap Equity Fund, she and her team utilizes a similar management approach to that of the Indian Equity Fund: “We also follow a fundamental, bottom-up research process to invest in companies. This means that we look at a firm’s individual merits, irrespective of whether it is present in the benchmark or not. We are benchmark aware but not constrained.”

“We believe that the benchmark is a backward looking construct, as the economies in Asia ex-Japan evolve. This means that companies are removed from the benchmark after significant underperformance, and an investor has the potential to lose out by tracking them.”

The Pacific Rim

When asked about the challenges Asia faces in 2017, Soon noted that: “There is a popular belief that Asian economies are only dependent on exports and therefore would be significantly impacted by the change in policies elsewhere. We neither deny nor agree with this completely.” She then elaborated: “If you draw an imaginary circle, with central Indonesia in the middle and include India and China as part of that circle, then you would realize that there are more people within that circle than outside of it. Therefore, the region by default has many opportunities for investors.”

Asia in Perspective

Soon believes that Asia is a big regional play and this is often an underappreciated fact. Companies in the area have significant domestic demands that, once again, offer many opportunities to investors: “Asian firms have also invested a lot in building technology and are many years ahead of their peers elsewhere. This strongly embeds them in the final product and supply chain. These companies should be able to weather out adverse implications at the global level if there were to be any.”

Integrity

PineBridge also keeps an eye on Environmental, Social and Governance (ESG) issues: “From our experience, active standards of corporate responsibility, sustainable business relationships and robust risk frameworks are sound yardsticks for management integrity. This, in turn, is a key ingredient of a company’s long-term outperformance.”

“We spend considerable effort in analyzing a management’s history of capital deployment, treatment of minority shareholders and conservativeness of accounting methods, which play integral roles in determining our investment decisions,” said Soon.

Finally, Soon acknowledged the growing interest among investors for the company’s Asia ex Japan Small Cap Equity Fund: “This is good news for us, but recent inflows have caused the cash level to increase while we wait for the right opportunities to deploy into stocks.” BM

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有系統的投資方針

Paul Lees 撰文

在繁忙中停步重審大局,是柏瑞投資的一貫作風。此原則助柏瑞印度股票基金及柏瑞亞洲(日本除外)小型公司股票基金分別奪得兩項基金100強(專業組別)的「同級最佳」大獎。

投資組合經理孫瑩心指出:「印度市場蘊含豐富的投資機會,我們預期許多公司可從印度高速經濟增長及演變中受益。我們採用自下而上的股票篩選過程及基本面研究,以在企業層面捕捉經濟增長帶來的機遇。我們的方法有系統地識別擁有穩固商業專營權地位、由優秀管理團隊經營,以及估值合理的公司,以創造可持續和可預測的投資回報。」

行之有效的策略

孫瑩心續稱,柏瑞的一套嚴謹投資流程建基於多年的公司研究經驗,經篩選的公司均十分穩健,有助投資組合在不同市況中保持穩定表現,在波動市況中能減低震盪。公司在印度設有強勁的投資團隊,負責在當地市場尋覓價格錯配機會,並與環球投資團隊緊密協作,助其他基金配置資產於印度市場。

嚴謹的投資流程

談及組合風險,孫瑩心說:「我們認為股價走向及價格波動均不是風險,反而,我們相信股價下跌是潛在投資機遇。我們將風險定義為永久性資本虧損,這可能來自三方面的錯誤判斷,包括目標公司的業務狀況、管理層質素及股票估值。風險亦可源自不能控制及不能預測的事情,例如通脹和稅制等。」

「其次,我們對單一股票的持倉時間長短亦會左右整體風險。若我們僅憑消息來決定是否投資某隻股票,或意圖短炒,組合風險就會增加,」她強調,「我們無意做短線買賣。」

總括風險控制策略,孫瑩心稱:「這些風險,在我們嚴謹而全面的股票投資流程中都有考慮,這樣可避免團隊倉卒地決策,確保投資有紀律,因為流程不容許我們買入未經研究的公司。」

人性化因素

對於科技在股票研究中扮演的角色,孫瑩心觀察到:「電腦不能取代人類的推斷。大部分數碼資料均屬短期性質,須要人類幫忙判斷最合適的一組篩選條件,來辨別什麼資料需接納,什麼資料需摒棄。」

「同樣重要的是,我們與企業和消費者的實際交流。過去一年,為了獲得貼近市場的第一手資訊,我們的團隊出差遊走了近5萬公里。」

無礙經濟的事件

2016年其中一個新聞焦點,是印度政府決定廢除及回收流通中的500及1,000盧比鈔票。在孫瑩心看來,「這是一個『非經濟』事件,就好像銀行要替換客戶即將到期的信用卡。由於更換舊鈔工作出現延誤,令事件添上『經濟』色彩。我們認為事件屬社會及管治方式重整,因此並沒有就此事改變我們的組合及策略。」

留意但不受制於基準

話題轉至柏瑞投資的亞洲投資策略,孫瑩心指她及團隊在柏瑞亞洲(日本除外)小型公司股票基金所採用之管理方法,與柏瑞印度股票基金的管理方式相似:「篩選公司時我們採用自下而上、針對基本面的研究流程。我們專注發掘一家公司有何獨特優點,不論它是否在基準指數之內。我們會留意基準指數,但不受基準束縛。」

「我們認為日本以外的亞洲經濟持續演變之下,基準指數僅可提供後見之明。成份公司通常在顯著跑輸大市後,方從指數內被剔除,故追蹤指數的投資者可能會蒙受損失。」

環太平洋圈

問到亞洲在2017年將面臨的挑戰,孫瑩心指出:「市場普遍認為亞洲經濟體以出口為單一支柱,會受其他地方的政策改變而受到衝擊。我們不否認此點,但亦不完全認同。若你以印尼中部為中心,畫一個包含印度和中國在內的圓圈,你會發現圓圈內的人口較圓圈外多。因此,對投資者而言,亞洲區本身已蘊藏大量機會。」

聚焦亞洲

孫瑩心認為亞洲是極具潛力卻被低估的投資主題,因為區內企業享有龐大本地需求,可為投資者提供豐富的機會。她說:「亞洲企業投放了大量資源發展科技,它們的科技水平已領先外地同行多年,製成品和供應鏈都培育出競爭優勢。若環球經營環境出現任何不利變化,這些企業應可迎難而上。」

誠信

柏瑞投資對環境、社會和企業治理(ESG)議題亦有關注,孫瑩心指:「根據我們的經驗,積極響應企業責任、可持續的業務關係和嚴謹的風險管理框架,是證明企業管理層有誠信的可靠指標,而管理誠信是企業達成長期卓越表現的關鍵。」

「我們費心地分析管理層過往的資本部署、公司如何看待少數股東,以及會計方法是否審慎,因為這些都是我們投資決策中不可或缺的考慮因素。」

最後,孫瑩心提到,投資者對柏瑞亞洲(日本除外)小型公司股票基金的興趣日增:「這對我們來說是好消息,但最近的資金流入令基金的現金水平上升。待適當時機出現,我們會把現金調配至股票投資。」 BM

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