Even the best fund managers experience short-term periods of poor performance. For Henrietta Luk, manager of the Melchior Asian Opportunities Fund, 2008 was a particularly difficult time. However, we are pleased to see that she has since turned performance around strongly.
2008 was a testing year for many fund managers. The extent of the US sub-prime mortgage problems were coming to the surface, and plenty of people, Henrietta Luk included, thought they would be largely confined to the West. As we now know, the West's problems had a knock-on effect on stock markets across the whole world. There was a pronounced sell-off and the areas that had previously risen the most, such as Asia, were worst affected. This fund therefore found itself battling a fierce headwind.
However, her 22 years of investment experience stood her in good stead. She took money out of Korea before the currency collapsed and she increased the level of cash in the fund during the course of the year. By November 2008 she felt Asian markets had become far too cheap, and in January this year she was fully invested once more, focusing on the Greater China region, which has since bounced back extremely well.
Today, she feels stock valuations are no longer so outrageously cheap. However, she believes they still represent excellent value, particularly in Taiwan, whose technology sector is home to some of the world’s fastest growing and most innovative manufacturers. She also sees real benefits to Chinese infrastructure projects. For instance, when a road is built in China it actually connects people and communities with the wider world, so it is transformational. In contrast, when we build or improve a road in the West it doesn't necessarily make a big difference because transport systems are already saturated.
In my opinion, the outlook for Asia is positive in the long-term, and the Greater China region is perhaps the most promising of all: Melchior are expecting China to see economic growth of around 9% per annum going forwards. Furthermore, Henrietta Luk thinks the credit crunch has given the Chinese authorities even more incentive to move from an export focus to encouraging domestic consumption, which should be positive for many companies. According to Henrietta Luk the difficulties in the West have also led to reduced competition in many sectors of the Asian economy because weaker firms have gone out of business. So, having weathered the storm, the remaining companies are stronger and have outstanding prospects for growth.
Whilst the fund has gone from being one of the sector's worst performers in 2008 to one of the best in 2009, it is still behind its peers over a three year period. Now that markets seem to have calmed, we believe Henrietta Luk’s aggressive style could work well.
Mark Dampier
Key features of the Melchior Asian Opportunities Fund
2008 was a testing year for many fund managers. The extent of the US sub-prime mortgage problems were coming to the surface, and plenty of people, Henrietta Luk included, thought they would be largely confined to the West. As we now know, the West's problems had a knock-on effect on stock markets across the whole world. There was a pronounced sell-off and the areas that had previously risen the most, such as Asia, were worst affected. This fund therefore found itself battling a fierce headwind.
However, her 22 years of investment experience stood her in good stead. She took money out of Korea before the currency collapsed and she increased the level of cash in the fund during the course of the year. By November 2008 she felt Asian markets had become far too cheap, and in January this year she was fully invested once more, focusing on the Greater China region, which has since bounced back extremely well.
Today, she feels stock valuations are no longer so outrageously cheap. However, she believes they still represent excellent value, particularly in Taiwan, whose technology sector is home to some of the world’s fastest growing and most innovative manufacturers. She also sees real benefits to Chinese infrastructure projects. For instance, when a road is built in China it actually connects people and communities with the wider world, so it is transformational. In contrast, when we build or improve a road in the West it doesn't necessarily make a big difference because transport systems are already saturated.
In my opinion, the outlook for Asia is positive in the long-term, and the Greater China region is perhaps the most promising of all: Melchior are expecting China to see economic growth of around 9% per annum going forwards. Furthermore, Henrietta Luk thinks the credit crunch has given the Chinese authorities even more incentive to move from an export focus to encouraging domestic consumption, which should be positive for many companies. According to Henrietta Luk the difficulties in the West have also led to reduced competition in many sectors of the Asian economy because weaker firms have gone out of business. So, having weathered the storm, the remaining companies are stronger and have outstanding prospects for growth.
Whilst the fund has gone from being one of the sector's worst performers in 2008 to one of the best in 2009, it is still behind its peers over a three year period. Now that markets seem to have calmed, we believe Henrietta Luk’s aggressive style could work well.
Mark Dampier
Key features of the Melchior Asian Opportunities Fund
