Teera Chanpongsang, manager of the Fidelity South East Asia Fund, seeks companies he believes are poised for long-term growth, aiming to invest before this potential is recognised by the wider market.
He tends to invest in businesses that fall into one of three categories. Firstly, companies with a strong franchise. These companies tend to be leaders within their field, either through their brand or use of technology. They should have a competitive long-term business model and generate good cash flow. Tencent, for example, is one of the fund's current largest holdings. As China's largest online services platform, its instant messaging service has proven extremely popular with 800 million users. According to the manager, Tencent has been successful at monetising its user base (converting the use of its services into earnings).
Secondly, Teera Chanpongsang seeks structural growth opportunities, including companies with earnings potential underestimated by the market. They may also be undergoing a restructuring or turnaround. Positions here include Indian bank HDFC. In the manager's view, the company could benefit as the uptake of financial products and services in India continues to rise, while he also anticipates earnings could grow by 20% over the next few years.
Finally, he seeks undervalued companies out of favour with other investors, often for short-term reasons, but where he believes the long-term potential remains intact.
To increase flexibility, the fund's benchmark recently changed from the MSCI AC Far East ex Japan index, which does not include India, to the MSCI AC Asia ex Japan index, which does. Exposure to India within the portfolio has therefore gradually increased and now accounts for 10.5%. Teera Chanpongsang is positive on his outlook for the country. The oil price falls, for instance, have allowed the government to remove costly fuel subsidies, while Prime Minister Narendra Modi has been seeking to encourage foreign investment. There remains a relatively high level of unemployment in India, but the manager feels this is improving. He also believes the existing labour force is very productive, which could keep the output of companies buoyant.
Our view on this fund
In our view, Teera Chanpongsang adheres to a sensible and pragmatic investment approach. We view the introduction of India into his investment horizon as a positive as it increases flexibility and provides a greater pool of opportunities from which the manager can invest. He has also previously built expertise investing in India as part of other portfolios he has managed.
The manager assumed responsibility for this fund in January 2014 and over this short time period the fund has marginally outperformed its benchmark (taking into account the aforementioned benchmark change), although there are no guarantees this performance will continue. While we view him as an experienced fund manager, we feel there are other managers in this higher-risk sector with stronger track records over a longer period, and in which we have higher conviction. This adventurous fund does not currently feature on the Wealth 150 list of our favourite funds across the major sectors.