A typical capital growth investor with the UK-based firm, which manages discretionary portfolios, would have an allocation of 7.5% to Asia, he said. Within the Asia allocation, the tech sector makes up a major part, Horniman said.
The firm invests directly into equities in the UK, Europe and the US, but allocates to Asia via third-party funds. They include the Hermes Asia ex-Japan Equity fund, which Jonathan Pines manages, and the Blackrock Asian Growth Leaders Fund, which Andrew Swan manages.
Horniman said when speaking to fund managers in the region, the same technology names dominated the conversations.
“Looking at the managers we like, they would have large weightings in companies like Samsung, which is a fairly easy one to buy,” he said. “Even with the recent problems, it is still a stock that many managers like.” In October, Samsung Electronics recalled millions of its Galaxy Note 7 devices, costing the company an estimated $5bn.
According to the September fund factsheets, the Hermes product had a 28.8% weighting in technology, with Baidu, Alibaba and Samsung Electronics all among the top ten holdings and Blackrock’s fund had a 26.7% weighting in technology, with Tencent Holdings being the top holding.
Domestic demand
Horniman said that cash flow into technology sector has changed significantly since the tech bubble in the early 2000s. “It used to be just about capital growth but now we are increasingly getting an income as well.”
Much of the Asia tech investment is concentrated in China and South Korea. The technology sectors in these countries, once heavily dependent on exports, are increasingly resilient because of their large and growing tech-savvy middle class that creates an internal market to offset weakness in export demand, he said.
“These days, Asia is a lot less dollar-sensitive and many economies are more sophisticated and resilient,” Horniman said. “There is a better balance – or yin and yang, if you like.”
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The two Asia funds the firm is invested with versus their benchmarks:
