Since the emergence of “Modern Portfolio Theory” and the “Capital Asset Pricing Model” in the late 1960s, institutional investors have taken a quantitatively driven approach to portfolio construction, looking to create portfolio diversification and obtain better risk-adjusted returns by balancing their asset-class exposures. This journey has seen several important advancements in thinking about how to optimally achieve desired results.
Funds that want to take the total portfolio approach first need to get the total portfolio view. To do that they not only need data – and lots of it – but a rock-solid understanding of exactly how they’re going to use it.
Specialist Asian equity strategy hiring for growth
Benchmark-beating Stonehorn Global Partners, a specialist Asian equity team of ex-Macquarie personnel, has expanded its Australian team after a $300 million year. The team that gave up managing $4 billion in assets at Macquarie Equities to build their own business in 2019 have delivered exceptional returns in their Stonehorn Asia Equity All-Cap Fund, adding 18.6%, some 4.97% above the MSCI benchmark.
Such has been the strength of their performance that the fund attracted $300 million in investments in its first year of operation, surpassing the all important $100 million in funds under management (FUM), the breakeven point for most Australian managers. The team of three (Sam Lecornu, Duke Lo and John Lam) has focused on Asian equities together since 2008 and look to finally be bringing the strategy to a broader range of investors after making its first distribution hire, Johnathan Goll. Goll has been tasked with expanding the firm’s reach into the industry fund and all-important independent financial advisory sector.
As the founders outline themselves in their latest quarterly update, before starting Stonehorn in 2019 “we considered every eventuality, or at least we thought we did,” now just 12 months on in the middle of a pandemic and “the global economy has stalled, share prices are again nearing record highs.” Yet the fund has delivered market-leading returns for investors and is well-placed to continue doing so as the core Chinese economy is among the first to recover from the crisis.
Asian equities remain a conundrum for Australian investors, with a well-known but limited number of direct exposures and seeming lack of first-hand experience in Asia, let alone China itself: something pointed out by Stonehorn in discussions with potential investors who may have missed out on returns. According to Lecornu, there is misconception that Chinese businesses will never be sophisticated, perhaps by virtue of our decades of experience buying ‘cheap’ Chinese products. He points out the experience of BYD, a Chinese manufacturer of Tesla-like cars, suggesting “had this potential client been in the car with us late last year as we made the hour-and-a-half trip to BYD’s Shenzhen plant, they might have seen things differently.” Hopefully they invested, given the substantial outperformance delivered thus far.
The three founding members would appear to have complementary skills, Lecornu being the face and ESG specialist, Duke Lo the lateral thinker and face-checker, John Lam the professor with a self-described pedantic approach to research,
The group has been backed by the private Schwartz family (being the Trawalla Capital group), which is building track record of backing new managers, including $4 billion real estate funder Qualitas. It would appear the Stonehorn team are preparing for an Australian onslaught, via an Australian unit trust, The Stonehorn Asia Fund, competing with the likes of Platinum and Antipodes, but with more on-the-ground experience. The timing seems impeccable as advisers face dividend cuts, slowing growth and a lack of diversification opportunities. So, best to watch this space.
