Lau is supported by a 17-member Asia Pacific ex-Japan equities team. All its members have analyst responsibilities and they are allowed flexibility when it comes to coverage, according to Morningstar. Lau is expanding his team, with a particular focus on strengthening the fund’s A-share coverage.
In regards to First State, Share likes the alignment of interest of the investment team with investors. “All the team members, including the analysts and portfolio managers, invest at least half of their bonuses into the funds they manage.”
In regards to the Value Partners product, aside from Cheah and So, the identities of the other members involved with the fund remains undisclosed. The duo is aggressively expanding their team, Share said. To date, there are 44 members, of which 12 are senior analysts with over 16 years of experience. Team members are spread across Hong Kong, Shanghai and Singapore.
Fee review
The First State product’s total expense ratio is 1.6%, which puts it in the competitive level. Share said that the category median stands at 2.04%.
She noted that the Value Partners fund is dampened by an unfavourable fee structure, which reflects its high volume trading strategy. This year, the Value Partners fund total expense ratio is 4.73%, as compared to 3.36% in 2013.
Share said that the Value Partners fund fee structure is a constant drag on its returns and that the portfolio managers should consider a revision.
Conclusion
Value Partners has recently been attracted to clean energy names, for example, energy producers and the waste water treatment companies. “These near-term trends, if spotted correctly, can deliver high returns.”
But the duo of Cheah and So are more focused on the short-term, so the fund tends to produce better results when cyclical opportunities are present.
Under a hypothetical investment scenario, Share said that she would choose the First State fund. She noted that the product should fare well against peer funds this year.
However, she said that investors looking at the First State fund should understand Lau’s three- to-five year investment horizon, and not be disappointed when they do not see immediate returns.
