FSSA Asia Focus

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.

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 in the medium to long term, despite being less risky than its benchmark. The fund’s best year of relative performance came in 2018 when the benchmark index was down for the year. The fund tends to generate most of its alpha in a falling market.

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.