FSSA Asia Focus

FSSA Asia Focus is a high conviction stock picking fund which invests in the shares of Asian firms demonstrating sustainable and predictable growth. The fund places a particular emphasis on governance and investing in quality companies that will respect the interests of minority shareholders.

Our opinion

This is a very solid fund, managed by highly experienced and proven fund managers who are backed up by an excellent team of analysts. The fund has historically delivered better returns than the index and its peers with less risk. It is a very strong candidate for any investor looking for an Asian equity fund.

Company description

FSSA Investment Managers is an investment management team within First Sentier Investors, managing a range of Asia Pacific and Global Emerging Market equity strategies on behalf of clients globally. FSSA was awarded the Elite Provider for Equities rating in 2021.

First Sentier Investors is a global asset management group focused on providing high quality, long-term investment capabilities to clients. It brings together autonomous teams of active, specialist investors who share a common commitment to responsible investment principles.

Fund manager

Martin Lau has been a manager on the FSSA Asian Focus fund since its launch in 2015. He has more than two decades of experience running Asian and Chinese equity funds and holds a Bachelor of Arts degree from Cambridge University and a Masters degree in Engineering.

Richard Jones has been co-manager on this fund since February 2016. He joined the First State Stewart Asia team in 2010 and is based in Hong Kong. Richard graduated with a first-class degree in economics from the London School of Economics.

Martin LauFund manager

Investment process

The fund’s philosophy is to identify quality companies, buy them at sensible prices, and hold them for the long term. It is a bottom-up, research driven fund focusing on detailed fundamental analysis. However, the managers do not stick their heads in the sand, and they are cognisant of the prevailing macro and political environment. The following factors are assessed before any share can be purchased: the quality of the company, the attractiveness of growth prospects, an assessment of risks, current valuation, the liquidity of the shares, whether cash is available, and the macroeconomic and political outlook.

The team defines quality companies as those with a strong competitive advantage and with an established track record of surviving previous economic cycles. Quality of management and governance are also critical measures of a company’s quality. There is also a preference for management alignment with shareholders. The team looks for businesses with sustainable and predictable growth supported by long-term drivers.

Valuation is a critical part of the process. The team uses a range of financial and non-financial metrics to assess a company’s value. The managers aim to buy stocks with a sufficient ‘margin of safety’. Valuations are regularly reviewed to consider the risk and reward of each holding in the portfolio and on the watchlist. Companies will be sold if quality becomes questionable, fundamentals change, management loses focus, or the risk/reward deteriorates.

ESG

ESG - Integrated

The team thinks that quality companies with superior and improving ESG credentials will outperform. It also believes that companies which don’t look after their customers, employees and suppliers are unlikely to be good long-term investments. For this reason, the team excludes a number of stocks from its investable universe including controversial weapons and cigarette manufacturers. The team always conducts thorough due diligence on management for all its investments and there are some people the team will refuse to invest in. The team conducts around 1,500 direct meetings per year and values governance extremely highly. The team gains valuable insights through one-on-one meetings with management.

Risk

This is a benchmark agnostic, high conviction fund with around 60 holdings. The fund is quite concentrated with the majority of the value in its top 20 holdings. New positions typically have a minimum size of 0.5-1%. Core portfolio holdings will usually be around a 4-6% weight. Regional, country and industry positions are largely a result of bottom-up stock selection. The fund has outperformed despite being less risky than its benchmark. The fund’s best years of relative performance came in 2018 and 2021 when the benchmark index was down for the year. The fund tends to generate most of its alpha in a falling market.

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