There are a number of reasons I am a fan of Aberdeen’s emerging markets and Asia guru Hugh Young. For starters, I am pro anyone who spared the time to talk to me as I researched my book – and doubly so if they do so on the final morning of a week’s trip to the UK when, I think it is fair to say, they had been worked pretty hard at both ends of the day.
I also like how nothing seems to faze him – not when he began that meeting by, well, mentioning a lady journalist he had sat next to earlier in the week and I replied he was almost certainly talking about the mother of my child. And not when a journalist at last week’s press conference appeared – with the tact and modesty so prevalent in my trade – to offer him advice on how to invest properly.
However, perhaps the biggest reason for my admir-ation – although one on which I reserve the right to change my mind – is because, in 22-odd months, Young’s Aber-deen Asia Pacific fund has doubled the small investment I made on behalf of my small daughter (who does not need to know anything about it if it continues this trajectory).
My reasons for investing across four emerging markets funds back in March 2009 were threefold – the asset class was still being unfairly punished for an essentially developed-market crisis, I had a timeframe of at least 18 years and, if I was about to write a book on emerging markets, I should at least put a little bit of money where my keyboard was.
Only the second of those reasons still holds true and indeed one difficulty I had while chairing the recent Unique Boutiques roadshow was hearing from the likes of SVM UK opportunities manager Neil Veitch how investors should be looking elsewhere than the developing world – not least the UK, you may have guessed – for value.
Since I mention SVM UK opportunities and apparently have a couple of paragraphs to spare, I thought Veitch was particularly interesting on the subject of the oil & gas sector and how the market values exploration and production companies such as Cairn, Tullow and some improbably named newer players.
For while investors grow understandably excited when E&P groups first find an oilfield, Veitch says what most have yet to take on board is that these initial discoveries tend not to happen in a vacuum. As such, rather than taking a punt on whether, say, Rockhopper or Desire strikes oil first, the smarter investor can enjoy the secondary price rises that come with subsequent finds and which have made the likes of Cairn and Tullow such a joy to hold over the last decade.
Anyway, returning to my daughter’s portfolio, by the Bristol leg of the roadshow, I was losing my resolve on the 18 years-plus timeframe and, while I am not saying I used the Young press conference as a private unitholder meeting, it was rather handily timed.
According to Young, managing inflation and, yes, asset bubbles will be the key issues for Asia in 2011 but equities there should remain supported by the region’s robust economic growth and the loose monetary conditions in the developed world.
Furthermore, he suggested, monetary tightening in Asia should be taken positively as it shows policymakers are ready to tackle inflation and indeed, since interest rates are still relatively low, any increases may be seen as a normalisation of policy.
What I particularly liked was Young’s typically phlegmatic anti-take on all those analysts, investors and hacks expecting nothing but bad news from the emerging markets and Asia. “We have had such a good run it would be no bad thing if people lost a bit of money as that would make them reflect on the risks of investment,” he said.
“It is unhealthy for people just to buy emerging markets blindly, assuming they will make money. You need periodic reminders that you can lose money and maybe this year is one of them – I don’t know.
“But while I may be prea-ching a message of caution, looking at everything and looking at our companies, I think they are fine.” So, 16 more years then.
Julian Marr is editorial director of Marketing-hub.co.uk and Thought leadershiplive.com and co-author of Investing in Emerging Markets – the Bric Economies and Beyond