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.
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Jonathan joined the firm in March 2009 as a portfolio manager for the Asia ex-Japan strategy, becoming its lead manager since its launch in early 2010. Before this, he was a fund manager at RAB Capital and an analyst at Orbis Investment Advisory in London. Originally from South Africa, Jonathan was a partner at PKF Johannesburg. He holds an MBA from Harvard Business School, is a CFA charterholder, and a chartered accountant. Under his leadership, the Asia ex-Japan strategy has won multiple awards, including Investment Week's Fund Manager of the Year for Asian equity in 2016 and 2018, and has been recognized with several accolades for best Asia ex-Japan equity strategy.
Sandy re-joined Federated Hermes Limited in July 2013 as a senior analyst, focusing on the Asia ex-Japan strategy, and became its deputy portfolio manager in July 2014. Before this, she was part of a two-person team managing the Ninety One Asia ex-Japan Equity Strategy at Ninety One. Sandy had previously worked at Federated Hermes Limited from 2009 to 2011 as an analyst on the Global Emerging Markets team. She holds an MSc in Quantitative Finance from Cass Business School and a BSc in Economics from University College London. Sandy is a CFA charterholder and a native Mandarin speaker.
Jonathan joined the firm in March 2009 as a portfolio manager for the Asia ex-Japan strategy, becoming its lead manager since its launch in early 2010. Before this, he was a fund manager at RAB Capital and an analyst at Orbis Investment Advisory in London. Originally from South Africa, Jonathan was a partner at PKF Johannesburg. He holds an MBA from Harvard Business School, is a CFA charterholder, and a chartered accountant. Under his leadership, the Asia ex-Japan strategy has won multiple awards, including Investment Week's Fund Manager of the Year for Asian equity in 2016 and 2018, and has been recognized with several accolades for best Asia ex-Japan equity strategy.
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Company Description
Federated Hermes is the amalgamation of Federated Investors and Hermes Investment Management. The joint entity today manages around $669 billion on behalf of investors around the world. Having joined forces in 2018, when Federated acquired a majority interest in Hermes Investment Management, the two companies have worked closely together, and the subsequent name change reflected the commitment to offering a broad range of investment strategies and solutions to clients globally. The existing teams, structures, philosophies and processes are all unchanged. Hermes was awarded the Elite Equities Provider rating in every year from 2017 to 2020.
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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.
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.
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.
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