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The Asian experience

Robert Lloyd George founded his eponymous firm in 1991 based on his fundamental belief in the power of the Asia and emerging market investment story.

Lloyd-George, great grandson of Liberal Prime Minister David, is a renowned expert on the region, writing several books on the subject. Among these is The East-West Pendulum, which posits that the momentum for global growth is comprehensively shifting towards Asian countries.

The group is particularly focused on China and India and feels these are now driving much of world growth rather than just in Asia.

As with other successful boutiques, Lloyd George is majority-owned by staff although 30 per cent of equity is spread across three external shareholders – Eaton Vance, Mirabaud and Sal Oppenheim.

Overall, it has around 80 staff with $10bn in assets under management. As part of that, the firm boasts one of the biggest Asia and emerging market equity teams out there, with 27 managers and analysts in six locations across the world. This gives the group an emphasis on local research. The various team members conduct around 300 on-site visits and 2,000 company meetings in a year.

Average experience among the investment team is 27 years and Lloyd George has been covering the region for over three decades, running international money for the UN pension fund during his career. He travels extensively throughout Asia, meeting key business and political figures, challenging managers and creating debate.

Asian mandates are primarily run out of Hong Kong although the group also has Singapore and Tokyo offices plus a research presence in Mumbai. London is the headquarters for the global emerging markets team, with an office in Florida for quick access to Latin America.

Notable team members include Kathryn Langridge, who joined in September 2007 after a long career at Invesco Perpetual to head the GEM team. She has introduced a high-yield strategy to the product range, seeking income opportunities in emerging markets. This is a slight extension on the group’s core approach, which focuses on firms offering sustainable growth over the long term.

While this tends to emphasise firms with strong capital management, Langridge’s latest launch also looks for those with high cashflow that should be able to pay decent dividends.

The group has various products focusing on different parts of the Asia and GEM regions, including various China and India only mandates. Not all of these are available to UK retail investors, with most of the accessible products spread across UK Oeic and Irish Ucits structures.

Lloyd George has an all-cap approach, looking across the whole market, running fairly concentrated portfolios in the 40 to 70-stock range.

It has also used local knowledge to tap into prevailing macroeconomic themes in the region.

As an example, the group launched an Asian natural resources fund in 2003 based on the call that China’s demand for commodities would become dominant.

It has also subsequently established an Asian Green product run by the same team to focus on the region’s increasing move toward environmental solutions.

Commenting on market conditions, Lloyd George compares the current situation to January 1975, at the start of his career, just after the deep bear market brought on by the 1973 Middle East war.

He adds: “The world did not come to an end and in January 1975 markets suddenly took off again in a powerful rally, which quickly regained much of the lost ground. At the end of 2008, the mood feels the same. There is almost universal bearishness, everyone has lost money in the markets and share valuations are selling at 30-year lows.”

Lloyd George remains convinced that the medium-term demand for metals, energy and foodstuffs from India, China and other developing Asian countries remains in a steady but strong uptrend over the next few years.

This is based on a view that the financial crisis does not change this long-term demographic trend with growing incomes. Against this background, the group believes investors in Asia and GEM can benefit from an extraordinary buying opportunity.

Lloyd George. says: “We believe Hong Kong and Singapore both offer excellent value in the bombed-out financials and property shares, as do Australian Reits at 15 per cent yield. The share prices of many Asian companies are predicting a 60 per cent fall in 2009 profits – we expect perhaps 20 per cent at most.”

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