Eastspring Investments launches Asian smaller companies strategy

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30 Nov 2017

HONG KONG (28 November 2017) – Eastspring Investments (“Eastspring”), the USD170 billion Asian asset management arm of Prudential plc, today announced the launch of the Asian Smaller Companies strategy^[1], which focuses on achieving capital growth by investing in Asia’s small and medium-sized entities using a value investment style.

Investing in 40 to 60 high conviction stocks^[2] the strategy aims to deliver attractive risk-adjusted returns through the investment cycle via a diversified portfolio of smaller companies that offer significant upside potential.

The strategy will be managed by Krishna Kumar who has 22 years of investment experience in Asia and is the Leader of the India focussed team. Mr Kumar is currently the Lead Portfolio Manager of the Indian Equity strategy and the China-India Equity strategy.

Kevin Gibson, Chief Investment Officer, Equities, at Eastspring, said, “We are very excited to be announcing this new investment strategy which is complementary to our existing range of funds, and will benefit from our Equity Team’s common research platform. An actively managed Asian small companies portfolio represents a great opportunity for investors seeking capital growth over time.”

Smaller companies^[3] sit in the earlier stage of the business life cycle which can lead to significant return opportunities. Although some sections of the market perceive them as highly volatile and risky, smaller companies present investment opportunities that can deliver an attractive risk return profile.

“The best approach to investing in this space is not to focus on the popular stock ideas or to chase the crowd, but look at the unloved, ignored and under-appreciated companies,” said Mr Kumar.

“Our initial portfolio includes carefully selected companies from across Asia ex-Japan. Every position in the 40+ stock portfolio2 is high conviction and has a compelling investment case,” said Mr Kumar. “Asian small cap companies are not well covered by the research community which means there are many opportunities lying in wait for those with the experience and the commitment to put in the hard work.”

Behavioural biases and shifts in expectations often drive stock prices away from the underlying value justified by their fundamentals. By focusing on valuation and targetting a longer term investment horizon, Eastspring identifies valuation outliers to construct a high conviction portfolio that is risk and bias mitigated. The output from our proprietary quantitative value screening is subject to in-depth fundamental research, including company visits, management interviews, peer comparisons and market dynamics.

The strategy is heavily invested in China, India, Taiwan and Hong Kong. Sectorally, the portfolio is biased towards Consumer, IT and Financial stocks.

Eastspring’s Equity Team manages over USD40 billion in various strategies (as at 30 September 2017) and has been active in Asian markets for more than 20 years.

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