Professional Planner|Zenith Fund Awards 2015 – international equities (emerging markets and regional)

Winner: Macquarie Investment Management

Zenith says: The Macquarie Asian New Stars Fund is led by John Bugg and Sam Le Cornu, who have built up an impressive performance track record since the fund’s inception in May 2008. Zenith considers the nine-person investment team to be one of the better resourced within the Asian equity market. Macquarie’s fundamental research process is structured to identify companies that are highly leveraged to the growing domestic demand thematic within the Asian region. The strong performance of the fund has been driven by the investment in higher-quality companies, which have the ability to grow their earnings faster than the broader market.

Zenith sector review: Despite exhibiting stronger economic growth, emerging market (EM) equities have significantly lagged their developed market (DM) peers over the past three to five years. Given the higher level of perceived risk, EMs have suffered as a result of the flight to safety. In 2015, we have seen a further period of underperformance in EM equities, relative to their DM peers. The broad market sentiment towards EMs remains relatively muted, given concerns around Chinese economic growth, heightened volatility in Chinese equity markets, and other country-specific issues such as political risk in Russia, Indonesia and Malaysia. This has resulted in a significant divergence in the returns of specific countries, providing scope and opportunities for active managers to add value.

Scot Thompson, global portfolio manager, Macquarie Investment Management (pictured): Volatility has been the absolute key. It’s unusual at the moment because we’re in such an incredibly low-interest-rate environment, which means the regulators have smaller levers to pull. So that makes it more difficult. Yes, we’ve seen it in the past, but the character of this current market is pretty unique: zero rates in the US and falling rates everywhere else. In this category it’s a lot about understanding the companies themselves; and having the guys on the ground in Asia doing really deep-dive research is critical. It’s [a] huge universe – 4000 names, or thereabouts – and they are choosing around about 80 names. They have an incredible opportunity to ignore those poor-performing companies and just really focus on those companies they think are going to weather the storm and deliver what they promise. The corporate governance checking and the work that goes around that; as well as understanding whether what the companies are telling you is going to materialise in the future. If you’re a broad, all-cap manager you don’t have quite as much movement in that you’re promising to be a market-relative player, rather than a pure exposure [player].

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