Federated Hermes Asia Ex Japan Equity

Federated Hermes Asia ex Japan Equity is a concentrated fund investing in emerging markets within the Asia ex-Japan region. Its manager is willing to buy all types of companies if the price is right. He actively invests in stocks that are currently out of favour but which he believes are likely to perform better in the future.

Our opinion

Jonathan Pines is a highly experienced manager and has spent well over a decade working on this fund. The contrarian philosophy makes it refreshingly different to many of its peers. The process has historically worked very well with the fund delivering excellent long-term performance.

Fund manager

Jonathan Pines was previously a fund manager at RAB Capital and an analyst at Orbis Investment Advisory before that. He joined Federated Hermes in 2009 as a portfolio manager. He has been the lead manager on this strategy since 2010. Jonathan holds an MBA from Harvard Business School. He is also a CFA charterholder and chartered accountant. Jonathan has won a number of awards for his performance managing Asian equities throughout his career.
Jonathan’s deputy manager is Sandy Pei who joined as a senior analyst at Federated Hermes' in 2013. Prior to joining Federated Hermes, she worked for Investec Asset Management as an Asia ex-Japan equity portfolio manager, and she also served as an analyst for the emerging markets team from 2009 to 2011. Sandy earned a BSc in Economics from University College London and an MSc in Quantitative Finance from the Cass Business School. She is a CFA charterholder and a native Mandarin speaker.

Jonathan PinesFund manager

Investment process

The investment philosophy of Federated Hermes Asia ex-Japan Equity fund is to be contrarian and the manager typically likes to go against the grain, often buying stocks which have underperformed. The fund has no defined style bias, and the manager will invest in any companies that are attractively priced relative to the quality of the underlying business. He also prioritises those where the potential for gains is greater than the risk of losses.

The process begins with a screen which strips out illiquid companies (those that are hard to trade quickly) and those below a certain size. The team also looks for companies trading more cheaply than expected relative to their quality.

This reduces the initial 18,000 universe to 250 stocks. Jonathan then develops a shortlist of 100 stocks for further research by the analyst team. This analysis results in a five-year projection for the company. The team will also meet management and this research process typically takes two weeks. After this, a meeting between Jonathan and the analysts will determine whether to buy the stock or not. More than 90% of ideas are rejected at this stage. Stocks are typically held for between 18 and 24 months.

ESG

ESG - Integrated  

Federated Hermes regards ESG factors as integral to the investment process and each factor is considered equally important when performing stock analysis. Managers use the proprietary ESG Dashboard tool, which incorporates data from leading providers (Sustainalytics, Trucost, MSCI, FactSet, Bloomberg, ISS and CDP), alongside voting information and engagement insights from EOS, the in-house stewardship team of leading governance and engagement experts. The Dashboard ensures that companies can be compared against their peers on a sector, region or global basis with respect to a range of ESG considerations. The Dashboard’s QESG score captures how well a company manages its ESG risks and, importantly, whether this is improving or not. The change in score can provide an early warning signal or suggest that management is successfully grappling with an issue. This stock-specific analysis is a valuable input to the team’s investment decisions and ongoing monitoring of and engagement with companies. Managers will never invest in a stock which is involved in a controversial industry or practice.

Risk

Federated Hermes Asia ex Japan Equity’s emphasis on valuation has historically led to an underweight to India and an overweight to cheaper markets such as South Korea and China. The contrarian nature can also mean that in certain markets it may underperform. The fund is typically a bit more volatile than its average competitor.

See more

Read more about this fund

The information, data, analyses, and opinions contained herein (1) include the proprietary information of FundCalibre, (2) may not be copied or redistributed without prior permission, (3) do not constitute investment advice offered by FundCalibre, (4) are provided solely for informational purposes and therefore are not an offer to buy or sell a fund, and (5) are not warranted to be correct, complete, or accurate. FundCalibre shall not be responsible for any trading decisions, damages, or other losses resulting from, or related to, this information, data, analyses, or opinions or their use. The Elite Fund rating is subjective in nature and reflects FundCalibre’s current expectations of future events/behaviour as they relate to a particular fund. Because such events/behaviour may turn out to be different than expected, FundCalibre does not guarantee that a fund will perform in line with its FundCalibre benchmark. Likewise, the Elite Fund rating should not be seen as any sort of guarantee or assessment of the creditworthiness of a fund nor of its underlying securities and should not be used as the sole basis for making any investment decision. FundCalibre disclaims any responsibility for trading decisions, damages or other losses resulting from any use of the Elite Fund rating. All performance data, as well as fund size, OCF, AMC, annual income (historic), share price discount or premium, is sourced directly from FE Analytics, and will change periodically.