HEAD-TO-HEAD: Allianz versus JP Morgan

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Investment approach

Both strategies are growth oriented. The JP Morgan fund’s investment process utilizes JP Morgan’s teamwide strategic classification framework, and it is also focused on the quality growth, including franchises, consistent earnings streams, solid return on equity and management teams that have strong track records of execution, according to Liang.

The portfolio has a quite a few overweight positions in industrial leaders, such as the Taiwan Semiconductor Manufacturing, AIA and Tencent, and the overall portfolio is tilted towards giant and large-cap names, she said.

The managers leverage the research input from both the team’s sector/product analysts and country specialists. The analysts follow a robust strategic classification framework and assess a firm’s ability to generate returns, durability of competitive position, and governance to fully understand the risk/reward profile of a business, according to Liang.

They then classify their stocks as premium, quality, trading, or structurally challenged and assign five-year return targets. Country specialists, who run the team’s single-country mandates, provide local expertise and rank stocks from 1 to 5 based on conviction levels.

Lead manager Aisa Ogoshi selects 50-80 high-conviction names for the portfolio and allocates the majority of assets to premium and quality names that possess strong balance sheets, good management teams, and solid growth prospects.

The balance is allocated to “trading names”, which may sport attractive valuations but face greater external or operational risks. Individual stock bets are a combination of strategic classification, country specialist rankings, and the managers’ own conviction level; they are typically within plus or minus 5% against the MSCI AC Asia Pacific index.

“Overall, the approach is well-structured, disciplined, and has been greatly executed over time,” Liang said.

The unconstrained investment process of the Allianz fund is primarily bottom-up-driven and focuses on firms with long-term growth prospects, capable management team, and sound financial strength, according to Liang.

Lead manager Stuart Winchester places considerable emphasis on a company management team’s competency and capability to deal with adversity. He also values a firm’s competitive positioning and its cash flows and balance sheet strength.

“A key distinguishing feature here is Winchester’s preference for underfollowed smaller-cap firms, and the portfolio typically has more than 40% of assets invested in small/mid-caps, compared to the less than 10% for the MSCI AC Asia Pacific index,” said Liang.

While the majority of the portfolio focuses on firms with secular growth opportunities, Winchester can invest up to 20% in short-term/thematic stocks that stem from temporary, situational events. The end portfolio consists of 55 to 75 names, with no limits imposed on sector and country bets relative to the index.

Along with the smaller-cap bias, active share tends to be around 90%, said Liang.

Position sizes typically ranges from 0.5% to 3.5% but can go higher in cases where the manager has strong convictions. The manager has the leeway to invest up to 50% in fixed income and 20% in cash if he believes the equity market is extremely expensive.

“However, Winchester hasn’t been active with asset allocation calls over the past 10 years,” said Liang.

Fund characteristics

Sector allocation:

Source: Fund factsheets, 31 October 2021

Country allocation:

Source: Fund factsheets, 31 October 2021

Top 10 holdings:

Source: Fund factsheets, 31 October 2021

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