Sun, Sep 25, 2016
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Asia Pacific Intelligence

Value driven Asian focused portfolio achieves annualised returns of 16%

Wednesday, January 09, 2013

James Hay

James Hay's Pangolin Asia Fund has $37m under management and has achieved annualised performance of 16.3% since launch in December 2004, and a return of 24.7% last year. Although the fund can do most things a hedge fund can, the current strategy is long-only value with an emphasis on investing in listed businesses for the long term. "The markets in which we operate are not that efficient and if you scratch around there are natural arbitrage opportunities" he says, in an interview with Asia Pacific Intelligence.

The portfolio is currently standing at 22% in Singapore, where the firm is headquartered, 42% in Malaysia, 24% in Indonesia and 12% in one stock in Thailand. The high return for 2012 reflects earlier portfolio positioning. "What tends to make us money is what we have done a year or two before" Hay says. "At the end of November 2011, markets were weak and we invested excess cash when things were cheap." The fund made money in Thailand and Malaysia.

"We are a research house that occasionally deals" Hay says. "We don't aim for performance over the month or quarter but really for the long term so our results largely come from something we have done a while ago."

Hay favours Malaysia, which is currently 3% of the MSCI Emerging Markets index weighting having been at 25% in 1993. "A lot of Asian institutions left Malaysia after the Asian financial crisis" Hay says. "Large institutional investors struggled to find liquidity and investments in Malaysia. The fund management industry in Malaysia is largely closed to foreign companies so not many fund managers are looking at the market in great detail. Once you get into the mid-caps the liquidity is low and, as a result, many companies are not widely covered or valued appropriately."

Indonesia has become a little too fashionable for Pangolin's value hunt. "We made pretty good money buying that market in 2008 and 2009 but we have been net sellers over the last couple of years. The valuations are stretched in Indonesia - you can buy stocks that offer as good growth prospects more cheaply in Malaysia and Singapore."

Unlike most fund management companies operating in the region, Pangolin does not invest in palm oil due to the destructive impact that crop has on the environment, the habitat of endangered species and indigenous people. "In my view, it is totally unacceptable for fund managers to own this industry and close one eye to the damage it causes" he says.

The firm has four full time investment professionals and presently invests in only four markets and 18 companies in total. "We have had institutional investors but we are too small for some" Hay says. "We don't hedge - we look for long term outperformance through buying good companies cheaply. When markets fall back we come scalable." The fund offers quarterly liquidity and a 2% redemption fee for the first 12 months, which is effective in deterring shorter-term thinkers. "We only want genuine long term money" he says.

"It is hard to find investors who share our long-term thinking. Or if they do, very often their clients don't. The macro news is always so gloomy that committing to a long only, emerging markets fund investing in small companies is something considered too risky by some; especially a fund that practises no hedging or volatility management".

The current investor based includes individuals (lots of fund managers and people who have visited for their institutions, found them too small and made a personal investment), private banks and single and multi-family offices.

The team looks for other opportunities beyond the four countries in which they currently invest. "China scares us on corporate governance, Vietnam we look at but there is an in-built currency depreciation, there are cheap companies in Sri Lanka and we are pretty comfortable with Korea. We understand the ASEAN markets very well and we could replicate our portfolio in other markets but there have to be strong arguments to expand our geographical coverage. It's bound to happen at some point in the future."

 
This article was published in Opalesque's Asia Pacific Intelligence our monthly research update on alternative investments in the Asia-Pacific region.
Asia Pacific Intelligence
Asia Pacific Intelligence
Asia Pacific Intelligence
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Star names struggle as smaller hedge funds make hay[more]

    From eFinancialnews.com: Many big-name funds have been hit by sharp reversals in markets, including US government bonds and UK stocks, and have struggled to extricate themselves from positions that have gone bad. According to data group eVestment, hedge funds below $250 million in size are up 4.1% t

  2. North America - Acela fight splits hedge fund Connecticut and old money enclaves[more]

    From Bloomberg.com: Connecticut’s residential coastline is two worlds, the one of newcomer millionaires and one whose wealth and New England roots span generations. Now, their differences over a rail route threaten to gum up plans for the U.S. Northeast’s fastest-ever trains. About 30 miles from Man

  3. Activist News - Caesars offers creditors another $1.6bn, would spell end of hedge fund ownership, Activist investors double chance of CEO exits[more]

    Caesars offers creditors another $1.6bn, would spell end of hedge fund ownership From Calvinayre.com: Casino operator Caesars Entertainment has improved its offer to junior creditors to over $5b, but the offer is only good until Friday. On Wednesday, Caesars added an extra $1.6b to the $

  4. Comment - ‘Gut feeling’ measurable in hedge fund traders, How hedge fund managers can use blockchain to maximize benefits[more]

    ‘Gut feeling’ measurable in hedge fund traders From Laboratoryequipment.com: “Gut feeling” is an intangible – an automatic hunch – based on prior experience for some people. But the “gut feeling” is actually a measurable response developed in professionals doing some high-risk work, acco

  5. Opalesque Exclusive: Modern investor tools (2): A platform that does the job for you[more]

    Benedicte Gravrand, Opalesque Geneva: A new series on technology providers that assist asset allocators. There is disruption in the investor part of the world of hedge funds, coming from platforms that can replace traditionally-run search and analysis. Here is one of them. L