A pioneer approach to new economies

As one of the early pioneers in emerging markets, Acadian can boast that members of its original investment team, formed when the manager launched its first portfolio in 1994, are still with the company.

Managing director of Acadian Singapore Richard Barry says: “Our senior investment team has been directly involved in managing this strategy for that entire period, giving us a longevity and continuity of experience that is quite distinctive.”

Acadian, winner of the emerging markets/Asia (ex Japan) category of the Fund Manager of the Year awards, uses a combination of bottom-up stock selection and top-down country valuations in order to develop its forecasts.

“Our stock selection factors focus strongly on value, but we enrich that with additional factors dedicated to earnings forecasts, quality and price movements,” Barry says.

“At the country level, we also look at valuations, but also incorporate some macro-economic data and market volatility and risk measures.

“Over the most recent 12 to 18 months, we have seen strong value added from stock selection in a number of markets, particularly in Asia.”

These include Taiwan and China, with Barry adding that an overweighted focus in Russia and Turkey contributed to Acadian’s strong performance. This has resulted in a three-year annualised return of almost 35 per cent.

With just under $7 billion invested in emerging markets assets, Barry says the manager has “a non-emotional, non-judgmental approach that has no problem in favouring distressed markets that other investors are avoiding”.

The two finalists in this category are Aberdeen Asset Management and Lazard Asset Management.

Aberdeen Asset Management’s Sydney-based director Charlie Macrae says that a consistent outperformance in the GEM & Asia Pacific ex Japan asset classes demonstrates its proficiency in managing assets in this sector.

“Good stock selection is the main driver of alpha, along with tactical top-slicing/adding on weakness within a basic buy and hold strategy,” he adds.

“Our stance is to assess companies from the perspective of downside risks, making sure of what we are buying and being careful not to overpay.”

Macrae says Aberdeen’s internal processes are also an advantage.

“The transparency of our underlying investment process, its application and ease of replication are also points of differentiation.”

Stock selection is the key driver of performance at Lazard, according to Asia-Pacific senior managing director Rob Prugue.

“Because we are bottom-up driven, our weighting process is not purely driven on country allocation, but stock selection. If we are overweight in certain countries, it’s not because the portfolio manager made a cognisant decision to be overweight in the market, but because the underlying securities in the market are showing better value.”

Prugue adds that Lazard’s emerging markets group incorporates not only equities, but fixed income and a fund-of-funds that invests in closed-end exchange traded funds.

In addition, consistency of leadership in the form of lead portfolio manager James Donald is a major benefit, Prugue says.

“Our fund is bottom-up, but obviously it does utilise some of the macro top-down views as used by the income fund. And the fund-of-funds provides James with access to some of the factors which are driving his competitors and peers.”

Emerging markets/Asia (ex Japan)

Winner: Acadian Asset Management

Finalist: Aberdeen Asset Management

Finalist: Lazard Asset Management