03-06-2012, 09:11 AM
A new series which I will post up monthly which features interviews with leading Fund Managers and market experts, and asks them about their strategies.
The Straits Times
Jun 3, 2012
Buy and hold for steady gains
In the first of our monthly series featuring fund managers and leading market experts, we ask Aberdeen Asset Management Asia's managing director Hugh Young about his slow and steady approach to investing.
By Aaron Low
In the topsy-turvy world of micro-second investing, complete with computer algorithms making automated buys and sales on behalf of traders, Mr Hugh Young's approach to buying companies based on values and trust may seem antiquated.
The managing director of Aberdeen Asset Management Asia studies a company, meets the management for lunches and visits the company's facilities - all before buying a single share of the firm.
But once he does, he sticks with it for a long time. Many of the firms he has bought have continued to stay in the funds he manages, for more than a decade.
Asked if he is a disciple of value-investing, much like the Oracle of Omaha Warren Buffett, Mr Young says: 'Well, who wouldn't say they are buying value?
'For us, it's about buying value with growth. We want growth but we also want growth at a value.'
The Aberdeen Pacific Equity Fund, which uses this approach, has not done too badly either.
Since its inception back in 1997, the Asia-focused fund has returned 11 per cent a year. This has beaten by a fair margin the MSCI Asia Pacific Index, which has seen 7.4 per cent annualised returns since 1997.
In simple terms, if you had invested $1,000 with the Pacific Equity Fund, your funds would have grown to about $4,700 now.
Q: How do you identify companies to buy for your funds?
We pick long-term leaders in many fields. We do this by getting to know them as best as possible, including making repeated visits to their offices to talk to their management.
I think some investors are sometimes dazzled by the prospect of growth of small companies or growth stocks.
Facebook, for instance, is 'let's all get excited about growth'.
But when there is a slight disappointment in the performance, the market reverses suddenly, and people may lose a lot of money.
And many did, did they not?
Q: How long do you usually hold your companies for?
Most of them have been with us for 10 to 15 years. Ideally, we'd like to hold them for a long time.
For instance, we've had OCBC since the inception. We've also held some Indonesian stocks from as far back as 1987. That's more than 25 years.
Over the last year or so, we've added just three companies - Li and Fung, AIA and HSBC.
Q: So it's a buy and hold strategy? I thought experts said that's all dead and buried in the current volatile landscape?
Yes, it is buy and hold. It's a rather torturous process but it's slow and steady.
But then again, timing the market is not all that easy. People say they can time the market but I've not come across very successful people.
Wasn't it just recently that JP Morgan's chief said they had lost US$2 billion (S$2.6 billion) in trading?
So maybe you can do well for three to four years, getting very good gains, but after that it can all go to pieces.
I don't think many people will be awfully excited about our stocks and they are really nothing to shout about.
But we've had a decent run - taking into account our exorbitant 2 per cent fees - getting about 4 per cent more than our benchmark on an annualised basis.
So we've done okay. But this is no guarantee that we will continue to do as well.
Q: What do you consider to be some of your best buys over the years?
Oh, not very exciting and maybe even boring. But these are good companies with good management that have grown well in a conservative, steady manner.
One is OCBC, which we bought in 1996 for our Singapore fund. Good bank, done all the right things and grown well.
Another is Australian insurance company QBE, which we added in 1991. Its share price has taken a bit of a hit due to the floods in Thailand but a good company still.
Another is Siam Cement in Thailand. Big company involved in the growth of the country too.
Q: With the markets falling now, are you looking out for good bargains?
I would say that there are no stunning bargains for sale now. And looking at the macro environment, it does seem that things could get a lot worse.
Q: Some investors have described the period between the 1950s and 2000s as being the great bull market. Is that the last great bull run or can we expect another?
I've never really felt that there has been a giant bull run in my 30 years of investing. In hindsight, it may seem that way but, while I was in it, it did seem as though we were just lurching from one crisis to another.
The market is perennially volatile and swings from wild euphoria to depression. But I do welcome the volatility as this creates opportunities.
aaronl@sph.com.sg
The Straits Times
Jun 3, 2012
Buy and hold for steady gains
In the first of our monthly series featuring fund managers and leading market experts, we ask Aberdeen Asset Management Asia's managing director Hugh Young about his slow and steady approach to investing.
By Aaron Low
In the topsy-turvy world of micro-second investing, complete with computer algorithms making automated buys and sales on behalf of traders, Mr Hugh Young's approach to buying companies based on values and trust may seem antiquated.
The managing director of Aberdeen Asset Management Asia studies a company, meets the management for lunches and visits the company's facilities - all before buying a single share of the firm.
But once he does, he sticks with it for a long time. Many of the firms he has bought have continued to stay in the funds he manages, for more than a decade.
Asked if he is a disciple of value-investing, much like the Oracle of Omaha Warren Buffett, Mr Young says: 'Well, who wouldn't say they are buying value?
'For us, it's about buying value with growth. We want growth but we also want growth at a value.'
The Aberdeen Pacific Equity Fund, which uses this approach, has not done too badly either.
Since its inception back in 1997, the Asia-focused fund has returned 11 per cent a year. This has beaten by a fair margin the MSCI Asia Pacific Index, which has seen 7.4 per cent annualised returns since 1997.
In simple terms, if you had invested $1,000 with the Pacific Equity Fund, your funds would have grown to about $4,700 now.
Q: How do you identify companies to buy for your funds?
We pick long-term leaders in many fields. We do this by getting to know them as best as possible, including making repeated visits to their offices to talk to their management.
I think some investors are sometimes dazzled by the prospect of growth of small companies or growth stocks.
Facebook, for instance, is 'let's all get excited about growth'.
But when there is a slight disappointment in the performance, the market reverses suddenly, and people may lose a lot of money.
And many did, did they not?
Q: How long do you usually hold your companies for?
Most of them have been with us for 10 to 15 years. Ideally, we'd like to hold them for a long time.
For instance, we've had OCBC since the inception. We've also held some Indonesian stocks from as far back as 1987. That's more than 25 years.
Over the last year or so, we've added just three companies - Li and Fung, AIA and HSBC.
Q: So it's a buy and hold strategy? I thought experts said that's all dead and buried in the current volatile landscape?
Yes, it is buy and hold. It's a rather torturous process but it's slow and steady.
But then again, timing the market is not all that easy. People say they can time the market but I've not come across very successful people.
Wasn't it just recently that JP Morgan's chief said they had lost US$2 billion (S$2.6 billion) in trading?
So maybe you can do well for three to four years, getting very good gains, but after that it can all go to pieces.
I don't think many people will be awfully excited about our stocks and they are really nothing to shout about.
But we've had a decent run - taking into account our exorbitant 2 per cent fees - getting about 4 per cent more than our benchmark on an annualised basis.
So we've done okay. But this is no guarantee that we will continue to do as well.
Q: What do you consider to be some of your best buys over the years?
Oh, not very exciting and maybe even boring. But these are good companies with good management that have grown well in a conservative, steady manner.
One is OCBC, which we bought in 1996 for our Singapore fund. Good bank, done all the right things and grown well.
Another is Australian insurance company QBE, which we added in 1991. Its share price has taken a bit of a hit due to the floods in Thailand but a good company still.
Another is Siam Cement in Thailand. Big company involved in the growth of the country too.
Q: With the markets falling now, are you looking out for good bargains?
I would say that there are no stunning bargains for sale now. And looking at the macro environment, it does seem that things could get a lot worse.
Q: Some investors have described the period between the 1950s and 2000s as being the great bull market. Is that the last great bull run or can we expect another?
I've never really felt that there has been a giant bull run in my 30 years of investing. In hindsight, it may seem that way but, while I was in it, it did seem as though we were just lurching from one crisis to another.
The market is perennially volatile and swings from wild euphoria to depression. But I do welcome the volatility as this creates opportunities.
aaronl@sph.com.sg
My Value Investing Blog: http://sgmusicwhiz.blogspot.com/