Regional/Emerging Market Equities: Aberdeen’s meet and greet strategy

It came down to two worthy finalists in the Regional/Emerging Market Equities category, but highly experienced Aberdeen Asset Management ultimately came out on top with its Aberdeen Emerging Opportunities Fund.

Researcher Lonsec noted the UK manager’s 20 years’ experience in emerging markets, as well as its team of over 30 dedicated analysts, which makes it one of the largest teams in Lonsec’s emerging markets universe.

A skilled team of this size is certainly important, agreed Stuart James, head of fund distribution at Aberdeen, stressing the significance of having good resources at your disposal in the emerging markets arena, as well as a solid approach to due diligence.

“Obviously the emerging markets is geographically a very diverse area … it’s a big area to cover, so you really do need the resources.

“So we’ve got over 30 global emerging market specialists around the world. And it’s only if you have that level of resource that you can go and do [a high] level of due diligence at a company level.”

Aberdeen’s “deep heritage” in Asian equities investment was a key advantage, Lonsec also noted, as well as the manager’s bottom-up company research effort, which was considered to be “highly structured, disciplined and comprehensive compared to many other emerging markets managers observed”.

James also commended his company’s approach in this respect.

“We do everything from the company up. So we’re bottom-up analysts,” he said.

“For the moment, given the uncertainty of the global economy and the slowdown we’re seeing, we are still very much focused on those defensive fundamentals — that is, companies which actually have proven cash flow, aren’t over-leveraged, so it is almost a ‘safety first’ approach at the moment.”

In terms of performance, James said Aberdeen has performed better than its peers against the benchmark. “Obviously, like everyone we have lost money, but very much at the heart of the Aberdeen investment philosophy is understanding the companies we invest in. And as a result of that we have a large focus on downside risk, so we only invest in high quality companies … which in this environment are the companies that are going to survive, the companies that are doing the basics right, have good cash flow, aren’t over-leveraged, which are going to prosper.”

On the point of due diligence and screening, Lonsec pointed to the manager’s frequent contact with company management and corporate governance assessment.

“Aberdeen’s approach has served investors well during the turbulence of the past year, delivering a strong period of peer and benchmark relative outperformance.” While the emerging markets sector is facing its share of challenges in the current market, runner-up Premium China Funds Management’s Value Partners similarly boasts decent results despite the difficult market conditions.

“Given that this has been a one in 80-year event, we would not have expected to be still showing exceptionally strong returns in the last 18 months,” said Simon Wu, executive director, Premium China Funds Management.

“In relative terms, the fund has performed well and has certainly kept within its value style investment proposition for advisers and the underlying investors.”