Important information: 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 often spread their holdings across different regions - for instance, they may hold some of their portfolio in the UK, some in Europe, some in Asia, and so on. The logic for doing so runs like this: rather than putting all your eggs in one basket, you expose yourself to various different geographies’ return profiles. When one hits a rough patch, others should be there to carry the load. At the same time, you’re able to capitalise on regions that outperform the rest of the market.
What make sense in principle can be difficult to achieve in practice. The number of funds investing in parts of the world like Asia and Emerging Markets can appear bewildering for UK investors, who may feel more comfortable in familiar names closer to home.
For these investors, what’s needed is a fund that offers “core” exposure to unfamiliar regions. Such funds are typically benchmark aware, meaning they will offer good all-round access to the market they’re operating in, unlike other funds which pursue more niche strategies.
That’s what Teera Chanpongsang offers through his Fidelity Funds - Asian Special Situations Fund, one of our Select 50 choices of favourite investments. Chanpongsang has a flexible, style neutral approach to investing in Asia (excluding Japan) which could suit investors looking for broad exposure to the region.
Bottom-up stock picking
Being aware of his benchmark means Chanpongsang will size his positions relative to the underlying index, in this case the MSCI Asia ex-Japan index (a benchmark-conscious UK manager may size their positions relative to the FTSE 100, for example).
As well as offering investors a broad-based, core exposure to the region, this investment style should result in limited volatility when compared with other strategies and help the fund perform well across market cycles.
But that doesn’t mean Chanpongsang is constrained to the benchmark. There are over 1,000 companies across the index - this fund features 85 at time of writing. It’s up to the manager to pick and choose where he sees the best potential to generate returns.
Chanpongsang is a bottom-up stock picker, meaning he looks at individual companies and their return characteristics. Boasting 25-years’ investment experience, over which time he has managed six Asian equity portfolios with Fidelity, Chanpongsang looks for stocks which are priced attractively relative to improving earnings. His is a strategy that tries to minimise risk by avoiding companies with weak balance sheets and questionable corporate governance.
That approach sees Chanpongsang have a slight lean toward the “growth” style of investing - i.e. companies which look set to deliver rising earnings long into the future, regardless of the economic conditions. Particularly he likes those that have established themselves as global leaders through technology, scale or cost structure, and offer strong franchises that benefit from long-term structural drivers. Large positions in well known technology names like Alibaba (often referred to as the Chinese equivalent of Amazon), Samsung and Tencent, are typical of this approach.
But he’s not willing to pay for growth at any price. The companies he invests in will often look cheap relative to their improving earnings. That gives his style the feel of a typical “special situations” fund, which looks to identify mispricings in the market. These may arise when the market is yet to realise a company’s long-term growth prospects, or because a business is undergoing some kind of turnaround.
This broad remit, combined with Chanpongsang’s awareness of the benchmark, means this is a fund well suited to investors looking for broad exposure to Asia, and to capitalise on the region’s fast accelerating growth potential.
Important information: 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. Select 50 is not a personal recommendation to buy or sell a fund. 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. 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 a Fidelity adviser or an authorised financial adviser of your choice.
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