IM|Power recently teamed up with SharingAlpha to present the 2020 Wisdom of the Selector awards, which gave an opportunity to celebrate leading ESG funds, driving new standards and delivering alpha across a variety of categories. We interviewed each of the winners to find out what makes their funds stand out and how they’ve protected investments against recent market volatility. You can see the full list of winners and runners up here.
Following PineBridge Asia ex Japan Small Cap Equity Fund's win in the Single Region ESG Equities category, we spoke to the people behind the scenes, Elizabeth Soon, PineBridge Investments, to find out more about the services and products they offer.
Tell us, what makes your fund stand out compared with your peers?
We take pride in our time-tested, bottom-up investment process, which is style agnostic and benchmark unconstrained. This allows us the freedom to focus on thorough company by company research across sectors and markets in the Asian small cap universe to identify overlooked opportunities. We seek companies that have an indisputable competitive advantage, outstanding management, and are available at a discount to future cash flows. This disciplined framework results in a high active share portfolio (>90%) with 40-70 companies from a universe of approximately 17,000 small cap companies in Asia ex Japan.
We believe our approach has driven our alpha performance over time. The fund has outperformed the benchmark as well as average peer returns in one year, three years, five years and 10 years.[1]
How do you protect investments against the kind of market volatility we’ve seen this year?
In-depth due diligence and careful stock selection are key to risk management as much as they are at the core of our investment process. As mentioned earlier, we focus on companies that have strong business models with the ability to gain share and compound capital well across market cycles. When an unexpected crisis strikes, like the pandemic, such companies are more likely to survive the shock and even strengthen their positions in their respective industries during the crisis and over the long run. Our approach remains unchanged in this crisis and this has helped our portfolio weather volatility.
What is the biggest myth in investing in Asian small caps?
Two of the most common misconceptions about the Asian small cap market are that it is a shallow opportunity set and that Asian small caps are more expensive than other small cap markets globally.
- Size of the opportunity set: Small cap companies make up 96% of all listed companies in Asia Pacific ex Japan. The market is under-researched, making it a fertile ground to look for potential mispriced opportunities
- Value: Asian small caps have consistently offered better value (lower PE) than European and US small caps in recent years if you compare the MSCI AC Asia Pacific ex Japan Small Cap Index vs. MSCI USA Small Cap Index and MSCI Europe Small Cap Index.[2]
[1] Source: PineBridge, Morningstar as of 30 June 2020.
Fund performance is represented by A Class in USD. Average peer returns are calculated based on the total returns of funds in the Morningstar category HK Asia ex-Japan Small/Mid-Cap Equity, USD. Past performance is not indicative of future results.
[2] Source: Bloomberg, as of 31 July 2020.