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Caroline Maurer, Hong Kong-based head of Greater China equities at BNP Paribas Asset Management
Maurer manages the Parvest Equity China Fund and seeks “transformative companies”, or those that are undergoing business strategy changes.
Although 30% of the fund is allocated to transformative companies, they contribute around 60-70% of the portfolio’s alpha, she said.
However, transformative change does not always equal alpha for the fund.
Maurer said that she had invested in a telecommunications company that was undergoing management changes to address profitability issues.
“They [underwent] a change of management two years ago, and [they were able to improve] the company’s reputation and were able to cut costs. We saw that earnings were coming through, but the stock still failed to deliver alpha,” she said.
She explained that although the change was positive, the company remained at a disadvantage in gaining market share against the more well-established players.
“So even though the shorter-term earnings recovery was real, it was struggling to get a re-rating on the back of that, because there is always a bigger and better product out there.
“We were hoping that the reform would bring more life to the business given that reforms take longer than expected to actually make a huge impact on operations,” she said, noting that she held on to the company for 18 months.
Although Maurer’s position in the company was less than 1%, she believes that she should not have invested in the first place.
“It was an opportunity cost. It didn’t go wrong too much, but it certainly did not generate alpha.
“Our conviction for the company was not high either. So that basically tells you if you have low conviction in a stock [for a long time], you should probably never own it.”