I’m excited to announce that in a few weeks, I’m moving to Hong Kong. Whether I call it a sabbatical, an extended business trip or a research endeavour, any way I look at it, it’s a huge opportunity.
I’m heading to Hong Kong for five months to expand on our team’s investment expertise in the Asian region. I’ll be using Invesco’s Hong Kong office as a base – one of the benefits of working for a global company. From there, I’ll travel to meet with management teams, visit companies on site and attend various conferences.
Trimark has been investing globally for a long time. As far as our investment process goes, I firmly believe that this type of on-the-ground research cannot be duplicated from the office. There is plenty of important work to be done from my desk, but on-site experience adds another layer of knowledge.
So, why Asia?
Usually when I speak to investors/advisors about investing in Asia, I get one of two reactions:
- Full of enthusiasm because the growth opportunities from the populous region
- Full of concerns because of market volatility and opaqueness
Both are right, two sides of the same coin.
The problem is that oftentimes the excitement in the former group leads to investing at the wrong time and the anxiety in the latter group leads to missing out on a meaningful part of the world.
Here are a few things I feel are important to keep in mind:
- Asia is not a homogenous region. The region includes developed markets such as Japan, Australia, Singapore and Korea as well as emerging economies such as China, India, Indonesia and Thailand. Each country has different drivers, government/market structures and challenges.
- Inefficiencies and pricing anomalies. As with most developing economies, there are usually more of these situations to consider.
- Regulation and enforcement is weak. It’s a challenging market because, in general, there is less disclosure. There are many companies with controlling shareholders (ie: entrepreneur owner-operators or state-owned) that may not be driven to create value for minority shareholders. Investors cannot dismiss the potential for outright fraud in the region. Heavy due diligence is key.
- Globalization. The impact of Asia goes beyond Asian companies and Asia-focused funds. Asia is important for Canadian, American and European companies too. The region is relevant for large multinationals like Nestle, sure, but also for small-cap companies as well. (For example, International Rectifier Corp., a U.S. company and one of our top holdings in Trimark U.S. Small Companies Class, generates more than half its revenue from the Asia Pacific region.)
Travel is part of my job. I’ve recently spent time in Europe and Singapore. My colleagues on the Trimark Investments team also travel extensively.
On-the-ground research is a big part of the Trimark philosophy. Here’s why:
- Fundamental analysis. We are stock pickers. In picking individual companies, we need to understand the changing competitive landscape and the quality of specific management teams.
- Disciplined approach and long-term view. Because of market volatility, knowing how much to pay for a company is important. Having a long-term view means we can watch the seed grow and not worry about daily market fluctuations.
I’m working hard (yes, at my desk) these days preparing, driven to make the most of my five months overseas. My goal is to further our investment expertise in Asia – not only for Trimark Global Small Companies Fund, managed by Rob, Jason and I, but for the whole Trimark Investments team.
Stay tuned for my next blog post from Hong Kong.
Learn more about the Trimark Investments team.