Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/wealth-manager/article/a702315
Top GEM manager: why developed markets will continue to win
by Robert St George on Sep 11, 2013 at 10:59
Lam (pictured) noted that in a typical cycle, whichever of emerging or developed markets was in the bull phase outperformed the other by around 200%. In the present cycle, which he dated to the start of the post-crash recovery four years ago, he observed that developed markets were only around 50% ahead.
‘I wouldn’t expect a sharp reversal of fortunes in the short term for emerging markets,’ Lam concluded.
Despite the weak environment, Lam has delivered a top-quartile total return of 21.9% since his fund’s launch in March 2010, compared with 3% from the MSCI Emerging Markets index.
The manager has recently signalled a change to his approach, though. ‘The portfolio is currently a little too heavily exposed to domestic emerging market growth,’ he said, ‘through financials, telecoms and consumer brands.’ Together, these sectors comprise almost two-thirds of the fund.
‘Though the emerging market consumer story was always a little silly in the way it was marketed,’ Lam remarked, ‘the exposure had been justified by the valuations and underlying company trends. I don’t think this is the case any longer.’
He has therefore shifted slightly towards favouring exports; he has just a 0.2% weighting to industrials at the moment. An addition to his portfolio last month, for example, was the Korean group Nexen Tire. The company runs its production facilities in Korea and China, but generates half its revenues in the US and Europe.
Although it trades relatively cheaply, at around 10 times earnings, it labours under a 100% debt to equity ratio. Lam nevertheless took comfort from Nexen recently winning contracts with Mitsubishi and Fiat, the first non-Korean manufacturers with which it had secured such deals.
In contrast, Lam has been progressively trimming his stakes in domestic names such as Thailand’s Siam Commercial Bank and Semen Gresik, an Indonesian cement business. Lam explained that Thai banks had become ‘quite aggressive’ in extending loans, reminding him of the mid-1990s, while he doubted Indonesia’s construction boom could endure.
News sponsored by:
Today's top headlines
More about this:
Look up the funds
Look up the fund managers
On the road
on Dec 06, 2013 at 14:28