First State Stewart Asia is an independent investment management team within First State Investments. As at 30 September 2015, we manage US$20.6 billion across a range of small-, mid- and large-cap Asia Pacific equity strategies on behalf of institutional and wholesale clients globally.
With the investment members of 15 based in three offices, including Hong Kong, Singapore and Edinburgh, the team focuses on fundamental analysis to construct high-conviction portfolios using a bottom-up approach. There is a strong emphasis on high quality proprietary research, with more than a thousand direct company meetings conducted a year. Through these meetings, our objective is to find quality companies with strong franchises and proven management - companies that can be held for many years - while ignoring any short-term market ‘noise’.
We are long-term, conservative investors, with as much of a focus on capital preservation as capital growth. Our goal is to deliver strong risk-adjusted returns to clients over the long term. As a result, the team - with an absolute return mind-set - has recorded a substantial track record as a specialist Asian equity manager. Although this prudent investment style may lag in strong liquidity-driven or momentum-led markets, our approach has consistently produced long-term outperformance.
Our research coverage of Asian companies has often highlighted Japanese companies as industry comparable or as business partners. As some of our regional funds and client mandates have the flexibility to invest outside the geographical borders of Asia Pacific, we have been invested in Japanese companies for some time (our first investment into a Japanese company was made in 2011). We follow the same investment approach with Japanese equities as we do for all our Asia Pacific equity funds, namely with an absolute return mind-set and an eye on the long term.
In our view, companies that are able to deliver earnings growth through multiple cycles are a more attractive investment proposition than companies that haven’t been tested over long periods of time; those that fared well despite adverse conditions should be more likely to do better when the Japanese economy revives.
When researching companies, first and foremost, we look for management teams who are focused on innovation, profitability and growth, with an open mind towards change, and with good corporate governance. Secondly, we focus on companies with a distinct competitive advantage, high earnings visibility, a good track record and with a strong balance sheet and strong cash flows. Last but not least, we prefer companies with structural, long-term growth drivers that should prove more resilient in a down cycle.