Revealing the reasons behind Asia’s top funds, part 2
Every year, AsianInvestor's editorial team conduct an intensive analysis of the region's leading asset management service providers, fund products, and asset managers, to ascertain the top organisations of the previous 12 months.
The winners of these categories must combine a mixture of business performance, growth and progress, on both quantitative and qualitative criteria. Below, we detail why we chose the second half of this year's winners of our asset class awards category, which comprise the best performing funds.
GLOBAL EQUITY
Morgan Stanley Investment Management
Global Opportunity fund
Consistently high risk-adjusted and overall returns made Morgan Stanley Investment Management’s Global Opportunity Fund a clear winner in the global equity category.
The strategy recorded the best returns over one, three and five years, and the highest Sharpe ratio over three and five years, according to Evestment. In addition, its information ratio ranked in the top four over all three time periods, noted the data provider.
The fund focuses on bottom-up stock selection, assessing companies over a three- and five-year investment horizon. It aims to identify and exploit systematic biases, such as an overuse of indices for portfolio construction by other market participants, misuse of traditional heuristics used to evaluate companies with unique business models and the blanket application of valuation metrics across sectors, said Morgan Stanley IM.
The fund typically outperforms when high-quality individual stocks are in favour, rather than themes or sectors, noted the US firm.
Kristian Heugh manages the fund with the support of five team members. There have been no team departures in the past five years.
GLOBAL FIXED INCOME, HEDGED
Credit Suisse Asset Management
Nova (Lux) Global Senior Loan Strategy fund
Credit Suisse Asset Management’s Nova (Lux) Global Senior Loan Strategy fund stood out from rivals for its risk-adjusted returns in the category of global fixed income, hedged.
The fund ranked top by Sharpe ratio over five years and second over three years, according to Evestment. In respect of information ratio, the results were reversed: it came first over three years and second over five.
The management team invests in higher-yielding, secured and unsecured floating-rate senior loans, and other secured and unsecured senior floating-rate debt issued by corporations.
The fund prioritises issue selection using a bottom-up, relative-value approach and typically invests in instruments below investment-grade quality. It also makes opportunistic allocations to second-lien loans, high-yield bonds and Western European credit.
John Popp leads a six-person team in running the fund, and he and Andrew Marshak and Thomas Flannery, two other members of the team, have managed portfolios together for 20 years.
GLOBAL FIXED INCOME, UNHEDGED
PGIM
Global Core Fixed Income Strategy
PGIM’s Global Core Fixed Income Strategy consistently outperformed its peers’ information ratios in the category of unhedged global fixed income. It ranked top by that measure over one, three and five years, according to Evestment.
The fund aims to generate an average annual excess return of 100 basis points over the Bloomberg Barclays Global Aggregate Index by investing primarily in investment-grade global bonds, interest rates, currencies and derivatives.
It employs a risk-budgeting approach that places thresholds on country, sector, security, quality and currency exposures.
Research and relative value are the core of the investing process of PGIM, the asset management arm of US life insurer Prudential Financial. It starts by assessing global risk, and then country and term structure, currency and sector positioning, securities selection and risk management.
The fund is run by a 22-member global bond team led by Robert Tipp, chief investment strategist and head of global bonds, and Michael Collins, senior portfolio manager. The duo have co-managed the strategy since 2012.
GLOBAL REITS
Principal Global Investors
Global Real Estate Securities Income Preference fund
Principal Global’s Global Real Estate Securities Income Preference strategy took the prize in the global real estate investment trust (reit) category with its strong, consistent performance.
Over three and five years the fund recorded the highest information ratio and ranked in the top three by Sharpe ratio, according to Mercer.
The strategy aims to both deliver consistent risk-adjusted excess total returns and excess income return over the FTSE Epra/Nareit Developed NTR index through bottom-up stock selection.
Portfolio construction is driven by a barbell approach, combining high-yield holdings with high-growth holdings to create a portfolio that aims to be highly differentiated from the benchmark, said US-based Principal Global. The US firm’s Reit capability was developed in 1998 by Kelly Rush, chief investment officer for global real estate securities, who continues to lead-manage the product today, along with Tony Kenkel and Simon Hedger. All three have managed the product since inception, supported by a 16-member global reits team.
JAPAN EQUITY
Mitsubishi UFJ
Dedicated Small Cap37 (Japanese only) fund
Mitsubishi UFJ’s Dedicated Small Cap37 (Japanese only) fund posted consistently outstanding overall and risk-adjusted performance over several years, earning it our Japan equity award this year.
According to Evestment, the fund produced the best returns in its category over one, three and five years. It was also top ranked for both Sharpe and information ratios over three and five years.
The management team generally targets small-cap firms in their early stages, investing in 100 to 120 stocks with a maximum weight of 3% per name.
It seeks out idiosyncratic business models and structural growth themes at reasonable valuations, maintaining continual contact with a large number of small companies, said Mitsubishi UFJ.
Japan’s small-cap market is often inefficient because sell-side coverage is poor, added the firm, and each of the five team members interviews 250 to 300 companies annually to identify attractive investment themes quickly.
Chief fund manager Yoshiro Mizukami has led the strategy for 13 years and is supported by four small-cap analysts.
JAPAN FIXED INCOME
Meiji Yasuda Asset Management
Japan Bond fund
Meiji Yasuda Asset Management’s Japan Bond fund was the clear frontrunner in the Japan fixed income category thanks to the consistency of both its overall and risk-adjusted performance.
It posted the highest Sharpe ratio in its category over one, three and five years, and the highest information ratio over three and five years, according to Mercer. It also recorded the highest overall return over one year and the second highest returns over three and five years.
The Bank of Japan’s yield curve control policies over the last few years have proved challenging for the fund, Meiji Yasuda AM said, but it has found opportunities through going overweight on credit to generate returns from earning higher carry.
The management team has also sought out alpha opportunities by tracking price behaviour over a much shorter time frame, the firm added, and increasing both the frequency and volume of transactions.
Yasuhiro Suga lead-manages the fund, alongside five portfolio managers and five credit analysts.
SMART BETA
Enhanced Investment Partners
Enhanced Dynamic Moderate Active fund
Enhanced Investment Partners’ Enhanced Dynamic Moderate Active fund was the outstanding performer in its smart beta category, according to Evestment figures.
The product produced the highest overall returns versus its category rivals over three and five years, while ranking top by Sharpe ratio over five years, and second and third by information ratio over five and three years, respectively.
It is a quantitative US equity overlay strategy developed to complement institutional investment portfolios, and employs a variety of US active equity managers.
The fund is designed to identify performance cycles for stocks by style (growth and value) and capitalisation size. Its allocation strategy indicates when it is time to tilt away from an underperforming style or cap size and into an outperforming one, said Enhanced Investment Partners.
Equity portfolios are expected to remain fully invested throughout all market cycles, added the firm, stressing that it does not employ tactical asset allocation or market timing.
Investment portfolios using the Enhanced Dynamic fund are expected to derive positive risk-adjusted returns against all relevant domestic equity benchmarks over a full market cycle, said Enhanced Investment Partners.