New York-based Neuberger Berman launched its Global Thematic Opportunities Fund last week, the 10th fund within its Dublin-domiciled Ucits range, which it started in 2006.
Available to professional investors in Asia, the Global Thematic Opportunities (GTO) strategy seeks companies that are well positioned to benefit from global themes and is unconstrained by market capitalisation.
Tony Gleason, New York-based co-manager of the fund, has been spending time in the Asia-Pacific region researching investment themes and meeting prospective investors. He suggests that Australia, in particular, may prove fertile ground, given the interest there in global thematic strategies.
"We have seen a good level of investor interest in what we are doing," he told AsianInvestor earlier this month while visiting Hong Kong. Given the level of interest encountered, inflows are expected from Asia within the year, he says, adding that there is also interest in customised managed-account versions.
Gleason has been coming to Asia for six years, and this time is on an extended trip to the region to cover emerging markets from Indonesia to Mongolia.
The GTO strategy returned 8.52% (net of fees) on an annualised basis between its inception on December 31, 2003 and May 31, 2010, and has clients with investments ranging from $1 million to one client with $100 million. Its benchmark, the MSCI All Country World Index, returned 4.14% over the same period.
Historically, the strategy has found Asia very attractive, says Gleason, and that has been even more the case in recent months. "Back in March we ramped up our Asian exposure to 40% from about 20%," he says. In March/April, the Hang Seng Index was selling at 7x earnings with a 5% yield. That seemed remarkably cheap, as stock prices got crushed in 2008."
Not having a qualified foreign institutional investor (QFII) quota, Neuberger Berman cannot buy China A-shares and therefore gets its China exposure through H-shares in Hong Kong.
The GTO strategy is currently allocated as follows: US and Canada 33%, China 20%, cash 15%, Japan 8%, Europe/Central Europe 8%, South America 6%, Africa 5% and gold 5%.
As for specific investment opportunities, Gleason says: "We think about themes a lot, and agriculture is the theme we like now. It really comes down to how we're going to feed 60 million more people being added to the global population every year." Others have also pointed to the benefits of this theme, including Baring Asset Management.
Gleason suggests spreading risk across several industries, including fertiliser companies such as Potash Corp in Saskatchewan and SQM in Chile, and Japan's Kubota, one of the largest makers of rice planting and harvesting equipment in Asia.
Another Gleason likes is Chinese firm First Tractor. He notes that the Chinese government is subsidising the price of a tractor by 30% for individuals buying them, with the aim of increasing productivity through automation.
Indeed, 15% of the strategy's allocation is in agriculture-related names, across five stocks. That reflects an average holding of 2-3% per stock, with 40-50 stocks in total across the portfolio.
However, in view of the recent volatility, Gleason has gone to average positions of 2% per stock, to "broaden the portfolio out a bit more". He will not invest in more than 50 names, however, "because it's difficult to find that many good, conviction ideas".
Gleason adds that he has been adding energy-stock exposure recently, particularly on the oil and coal side. That's because energy prices have dropped recently, and share prices with them, offering a buying opportunity.
Moreover, natural gas consumption in China will provide a very significant growth opportunity. "Burning gas is a whole lot cleaner than burning coal and will be a lot cheaper to boot," he says. "Natural gas only represents 1-2% of China's energy consumption, and to get it to 10% presents a significant opportunity for companies that provide distribution services throughout China, such as Beijing Enterprise."