Matthews Asia’s Vivek Tanneeru chose not to reinvent the wheel when he took over from former star executive Tiffany Hsiao, but he believes his more generalist approach bodes well for the Asia Small Companies strategy he’s embarking on Has.
Speaking to Citywire Selector, Tanneeru (pictured), who is Citywire AAA-rated for his work in emerging markets and Asian small-cap stocks, said he believes technical innovation is critical to the development of emerging Asia become.
After acquiring the fund from Hsiao in August last year, Tanneeru said his knowledge of smaller companies made it a smooth transition.
‘I’m a growth investor who manages a portfolio that is doing well over the cycle while retaining a very high active stake. I follow general trends and then invest in 50 to 70 selected names instead of focusing on benchmarks. ‘
Tanneeru said this has led him to rely on technology and other fast-growing areas. “When you think of innovations in emerging markets, it is important to consider their absolute R&D [research and development] Expenditure. While the five largest industrialized countries cumulatively spend about 1 trillion US dollars on research and development, the corresponding expenditures of the five largest emerging countries amount to 800 billion US dollars. ‘
These rising numbers demonstrate the willingness of the Asian market to value innovation, added Tanneeru. ‘Our investors can benefit from the consumption growth that has shaped Asia for over two decades. Small and medium caps are better suited than large caps to accommodate changing tastes. ‘
Tanneeru gained more support earlier this year when fund managers Jeremy Sutch and Robert Harvey were assigned as co-managers of the Asia Smaller Companies Fund. He also continues to manage an EM small-cap fund for the San Francisco-based group.
Focus on new factors
An increasingly important factor, Tanneeru said, is ESG, so his focus is more on ESG integration and has become more clinical in removing companies that don’t get the grade.
“We often find that some companies don’t have the financial or human resources to document their environmental footprint or talk about their work in terms of employee satisfaction,” he said.
The two largest holdings in the Asia Small Companies Fund, valued at $ 50.9 million, are Indian financial group Shriram City Union Finance and tech company Silergy Corp.
While the pandemic has hurt consumer spending, Tanneerus is fourth largest shopping mall developer position at Phoenix Mills.
‘You are very good at managing capital and have very strong institutional investors by your side. Although the pandemic has blown the sector, they are now back in the market looking for attractive distressed assets that companies without good records have for sale. “
Speaking of the sector, Tanneeru said health care is attractive because it has changed so much in the past four years. It has an allocation of 15.0% compared to a benchmark weighting of 9.9%.
‘We continue to review many IP opportunities that keep popping up. Since last fall, our focus has been on finding cheaply valued consumer cyclical and financial stocks, and there’s one company out there that is in both tech and healthcare that we’re trying to get exposure to. And another company we worked with earlier this year is also using technology to improve clinical trials. ‘
The Matthews Asia Small Companies Fund also has IT exposures of 30.2% – nine percentage points more than the index – followed by Industry and Healthcare at 22.8% and 15.0%, respectively.
The fund returned 51.5% in US dollars for the three years ended May 2021, versus 31.3% for the average fund in Citywire’s Equity – Asia Pacific Small & Medium Companies sector.