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Tolstoy, Happy Families and Asian Managerial Success

TolstoyGFIA has put out a report about the Asian boutique universe that cites noted alpha authority Leo Tolstoy.

Before we get to that, though, let us remind our own global readers that GFIA Research Insights is produced in Singapore, and that given the record levels of air pollution in Singapore this year (visibility down to a few hundred meters at times), it is natural that the report concludes with a plea that those of us in luckier locales “save a thought for us laboring in the murk here.”

That thought is properly extended, and here is hoping for some dispersal of the existing murk, as well as some longer-term solution to the problems of “slash and burn” forest clearing techniques in nearby forests that have brought that murk about.

Raising Assets

But on to business … asset managers within that space keep telling GFIA that “asset raising is hard” in the present climate.

It isn’t going to become easy any time soon, but there is a new level of stability in which “the better manages are gradually attracting some assets back.”  The better managers all tell stories about their survival that are “generally comparable” with one another.

That leads us to the Tolstoy reference. The opening words of Anna Karenina are:  “Happy families are all alike; every unhappy family is unhappy in its own way.”  GFIA alludes to these words and makes the point that a happy family, or a successful Asian boutique manager, is generally an “unconstrained long manager” that is capable of picking good stocks in inefficient markets, notably Arisaig, One North, or Albizia.


In terms of performance, as the above table indicates, May was a pretty lousy month. The Japanese market was rallying as the month began, but that rally reversed itself toward May’s end.

[Speaking of Arisaig, as we briefly were above, GFIA also observes that its Arisaig Africa Fund rose 3.8% in May “boosted by strong returns in a Nigerian food and consumer stock and East African brewery stocks.”]

But back to Asia…GFIA has notes on a number of new launches/spinoffs that hope yet to keep their family of investors happy. Among them, Arena Capital Management is creating a fund with a Japan equity market neutral focus, seeded by FRM Capital Advisors. It will focus on “incremental moves in expectations surrounding earnings and corporate actions,” dividing a 300 stock universe into buckets.

Consumer Names

Cheyne Capital has built up the assets of its Cheyne Malacca Asia  Equity Fund to a “decent size,” and believes that it now makes economic sense to set up an office in Asia. This, they are meeting with the Monetary Authority of Singapore (the country’s central bank) to start the license process and hope to move their team to that country.

Cheyne is taking profits in consumer names in the ASEAN countries, because there has been a significant run up in valuations over the last three years. Stocks related to the demand for infrastructure are the new opportunity in ASEAN, and the team has added to these stocks, inclusive of a position in one of the four largest Thai contractors.

Imperial Capital, a long-only franchise created by Barbara Shaw in October 2011, is developing an Asia ex-Japan equity fund. The new fund will apply “stringent quantitative screening [to] 200 stocks to select 90 stocks” for fundamental analysis and monitoring. GFIA notes that they are biased toward consumer staples and dislike “financials and cyclical sectors” like technology, media, and telecomm.

The Sparx Group has restructured its OneAsia fund, a pan-Asia equity long/short operation, trimming the number of portfolio managers. GFIA says that “net and gross exposures are purely by products of their fundamental, bottom up research.”