Asia continues to lag other regions for integrating ESG principles with investing; better data and stronger regulatory requirements will help institutional investors, market observers say.
To that end, DWS Investments, the retail mutual fund brand of Deutsche BankÆs asset management division, has launched the DWS Global Inflation Buster fund to help investors face the challenges of an inflationary environment. The fund will be on offer to investors in Hong Kong and Singapore who are interested in ôbustingö the inflation cycle û as its name suggests. The portfolio targets stocks that will benefit from secular inflationary trends.
Andrew Tan will manage the fund. He has worked at Deutsche Asset Management since 2004 and is currently an institutional manager specialising in Asian equities mandates for European pensions and absolute return funds.
According to Tan, the fund will be benchmarked independently and will focus on absolute returns. While the MSCI World index will be used as a reference, he says he is planning to pick 90 stocks with just four criteria: strong cash flows, strong bargaining power, solid market positioning, and those that benefit from a positive regulatory environment.
Tan says these four factors are key in determining a companyÆs survival under an inflationary environment.
ôWe are not talking about mega-inflation like 20% to 30%, we are talking about inflation at 2%, maybe 3%,ö says Barbour.
ôWe think that the period of deflation û that 20-year purple cloud û is now behind us.ö He says this 20-year period of abundance and oversupply led to a lack of investment in food and minerals, which is why prices in these sectors are now on the rise.
He says a surge in re-investment at this stage wouldnÆt entirely fix the problem because of a change in global consumption. As Barbour explains, the current inflationary environment had its roots in the fall of the Berlin Wall and the subsequent failure of Communism. This had a domino effect, he says, and brought about the rise of China and India, and the creation of three billion new consumers on the planet.
ôThese three billion consumers have had a massive impact on the way things have played out,ö says Barbour. ôInitially it meant an outpour of low-cost labour; and that meant countries like China were exporting deflation. Then we entered two decades of good global growth.ö
Now, says Barbour, there are three billion people placing unprecedented pressure on the worldÆs resources. In their pursuit of better housing and an improved standard of living they have developed an insatiable appetite for steel, plastics, food, and energy. ôThis appetite is likely to remain strong for some time,ö he says.
Tan believes that, after the recent market corrections, there are cheap opportunities in equities. The portfolio will initially have a 26.4% exposure to North America, 18% to Europe, 11% to Japan, 35.2% to Asia-Pacific, 5.1% to Latin America, 3% to the Middle East and Africa, and 1.4% in cash.
Tan says, however, the portfolio is not geographic- or sector-specific, and that he might actively seek upside in currencies, especially in Asia-Pacific currencies. He says his strategy is 38% about growth, 15% tactical and 46% defensive.
On the growth front, Tan is seeking domestic consumption plays, particularly those in regions where urban population numbers are high. The defensive stocks will be those in the metals, agriculture and energy sectors that will continue to benefit from inflationary growth. And on the tactical front, Tan says there will selective opportunities in companies with high gearing and high dividend yields.
The fundÆs initial public offer period will continue until August 8. Minimum investment is $2,500. Management fee per annum is 1.5%.
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