The new fund is not constrained by benchmark indices and asset allocation decisions are based on economic considerations, market information, politics, charts and bottom up stock information. Up to 12 key criteria form the basis of fund manager Sally Macdonald’s stock selection process.
Macdonald has over 21 years’ investment experience. Before joining Dalton, she was a senior fund manager at Morley, with responsibility for the Asian Equity team. She has also managed Asian equities at Canada Life
When selecting stocks for the portfolio, Macdonald will take a thematic approach and favours companies with solid growth prospects over the long term and sound finances. The strongest theme in the portfolio is construction machinery and infrastructure spending, where Macdonald believes strong demand and improvements in profit margins are creating a super cycle in the region. She believes that while China and India are getting a lot of attention from investors, other parts of the region are being overlooked or forgotten.
In terms of asset allocation, Macdonald has chosen countries with improving consumer sentiment and a strong likelihood of falling interest rates. Korea, Malaysia, Thailand and Indonesia rank among the favoured regions at the expense of markets that are starting to look expensive such as India, Singapore and Hong Kong.
Macdonald will have a disciplined sell policy – if a stock reaches its internal target price, it will be reviewed and sold or reduced if necessary. When a stock reaches 4.5-5% of the fund, it will be top-sliced and a Corporate announcement or event induces a change of view.
Growth in Asia excluding Japan is expected to outpace growth in developed markets over the next couple of years, so this fund could be a worthwhile addition to an investor’s portfolio. The emergence of a middle class is helping to sustain domestic demand; so Asian regions are not solely dependent on the export market.
However, Asian markets are characterized by short-term volatility that could mean a bumpy ride for investors. A US recession would impact on growth within Asian markets, but this could lead to useful buying opportunities, given the positive outlook for Asian markets over the long term.