As members of the Sustainable Funds Group at Stewart Investors, co-managers David Gait and Sashi Reddy look to invest in companies purposefully working for the good of the environment and the global community. More specifically, the joint heads of the Stewart Investors Asia Pacific Leaders Fund seek out those companies benefiting from, and contributing to, the sustainable development of the countries in which they operate.
The managers of the Select 50 fund scan the Asia Pacific region (including Australia and New Zealand) for large and mid-sized companies, maintaining a list of around 300 of their favourite business matching their investment criteria.
When the price is right, the team starts to build a stake in these companies - a process that can take several years, as the two engage with company management, visit sites and build up reference checks from suppliers and competitors among other sources.
On the surface, the process might chime with many fund managers’ approaches around the City but, unlike many other firms, the core element of sustainability guides the Stewart managers’ search from the word go. With a vast region to select companies from, they focus on the businesses supporting a transition to a genuinely sustainable future. Providing responsible finance, building much-needed infrastructure or selling sustainable goods and services are some ways companies stand out from the crowd.
Identifying potential additions to the portfolio allows the managers to hit the road and begin kicking tyres. They conduct over 2,000 company meetings every year, meeting management on their home patch and getting a feel for how a business is run day-to-day.
And the research doesn’t end in the boardroom - the managers look for referrals at every opportunity and seek out the views of trusted businesses and directors. Staying in contact with suppliers, competitors and industry associates helps the managers sort fact from fiction and form a well-rounded view of the companies, away from the polished slideshows.
The result is a portfolio of the pair’s most concentrated and highest conviction ideas. Among the fund’s top ten holdings is Japanese firm Unicharm, a manufacturer of disposable hygiene and household cleaning products, and a specialist in the manufacture of products related to incontinence, female hygiene and pet care. The company operates in 80 countries and holds a dominant position in China, Indonesia, Vietnam and Thailand in nappy sales.
Also appearing in the fund’s top names is Australia-listed CSL Limited. The specialty biotechnology company focuses on the treatment and prevention of serious human medical conditions. Vaccines and antivenom are part of the firm’s product lines, as well as cell culture reagents for use in medical and genetic research.
Other examples of companies clearing the managers’ sustainability and profitability hurdles include India’s Mahindra & Mahindra, and the President Chain Store Corporation. The former is one of the largest vehicle manufacturers by production in India and the largest manufacturer of tractors in the world, with the latter operating supermarkets and convenience stores like 7-Eleven, from its headquarters in Taipei.
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