When Sashi Reddy says sustainability sits at the heart of his investment process, he means it. As a member of the Sustainable Funds Group at Stewart Investors, along with co-manager David Gait, Reddy looks 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 Asia Pacific region.
The managers of the Fidelity 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 businesses 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.
One company that fits the bill for the managers is Indian consumer business Marico. Starting out as a manufacturer of coconut oil for hair nourishment, the company expanded into health foods around 17 years ago. Reddy explains what attracted them to the firm:
“They were ahead of the curve and saw the need for Indians to evolve their consumption habits - an Indian curry is fine every so often but three times a day isn’t great for your health. So, they started an oats business, then healthy cooking oils and things like that. They have a good track record of building fantastic brands, of having an astute focus on profitability and the quality of ownership is fantastic as well. It’s companies like these that really attract us.”
For a fund of this size and geographical remit, investors might be surprised by a lack of direct exposure to Asia’s biggest economy. Reddy says interesting companies in China often fail to make the shortlist for selection due to their short track records but still maintains the fund benefits from indirect connections to the country.
He points to the fund’s holding in Unicharm, the Japanese manufacturer of nappies and feminine hygiene products, as a good example. Reddy explains: “In the late 80s and early 90s they chose to venture out into Asia, partly because Japan had a shrinking population so there would be fewer babies. Because the family owners are very long-term in their thinking, they set out to build a business in China. It’s been nearly 20 years and now we’re beginning to see the fruits of that effort, and they’ve also built a formidable presence in other parts of Asia.”
More on the Stewart Investors Asia Pacific Leaders Fund
The value of investments and the income from them can go down as well as up, so you may get back less than you invest. Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.