Vontobel Asset Management, a New York-based specialist in US equity value investing, is targeting Asian institutional investors for the first time. Peter Newell, managing director, has just completed his inaugural visit to Hong Kong to market the firm's newly created, Dublin-domiciled US Value Fund. The fund has also just been registered with Hong Kong authorities so that it is available to retail investors, although for now the focus is on the institutional market.
Newell explains the firm has a strategic alliance with Janus Group: Vontobel fills a specialist asset class for Janus in return to leveraging its international distribution platform. With $2.2 billion under management, Vontobel is too small to own its own distribution. (Its Swiss-based parent, Vontobel Group, separately has some $40 billion of assets under management, mainly in European assets.)
"Janus offers us access," Newell says. "It was their leadership that built an offshore, non-US business and we're taking advantage of that." Although Janus has acquired a number of US asset class specialists, in the case of Vontobel it has no ownership.
Although Vontobel also runs emerging market, Asia ex-Japan and European equities, for now it is only marketing its US value fund to this region. It has managed the value portfolio for 12 years; the Dublin fund is a clone of the established portfolio.
This time Newell just visited Hong Kong investors but plans to add Japan, Taiwan and perhaps Singapore to his list soon. Vontobel is also keen to register the value fund in other Asian markets.
Vontobel's strategy is to take concentrated value positions. Its investable universe consists of around 100 stocks, of which it may have 20-25 in the portfolio at a given time. The firm looks for companies with a long track record, proven profitability, a sustainable franchise, shareholder-oriented management and a price that is discounted 20-30% to the stock's intrinsic value. The firm stresses patience, noting that opportunities to buy good companies cheaply are rare, and must be fully taken advantage of.
If those opportunities don't arise, the firm sticks to cash; it currently has 27% of its portfolio in cash. "This business is about the integrity of the process," Newell argues, although he acknowledges some institutions don't like the notion of a large cash position. "We're not forcing money into the market where we don't find virtue.
"No one needs investment managers unless they add value over the 10-year Treasury bond," Newell says. Otherwise institutions should simply buy the index. "Compounding is the only philosophy investors should adopt," he adds, noting that in 2000-2002 when the S&P500 lost 51%, the US Value Fund was up 38%.
Will this pitch work today in Asia, during a bull market? "I can't say how well the concept will market here because we've just begun to try to raise money," Newell says. "But many companies such as insurance companies here are concerned about preserving capital. I think our no-excuses style resonates with them."