The strategy employs a fundamentals-driven approach to investing, with the aim of creating a high-conviction portfolio of 50-100 stocks (up to 45 long positions and 45 short positions). The strategy is benchmark agnostic, allowing the team to invest flexibly across the Asia Pacific opportunity set, and with an absolute mindset.
The investment process is centered around relative earnings (EPS) revisions, which has historically been one of the key drivers of alpha in the region. The aim is to capture turning points in companies that have high EPS revision potential over a forecast period of up to 12-18 months1.
The team conduct detailed fundamental analysis and financial modelling on companies across the region to identify candidates with the highest EPS revision potential. The aim of this process is to identify sources of potential surprise (positive or negative) in the company’s key profit drivers such as revenue, costs, margins, cash flows and ultimately earnings per share. These sources of surprise can be derived by many factors including management strategy and operational decision making, competitive dynamics, macro and micro economic factors.
On the long side, the core philosophy of the strategy is to identify the stocks with the best potential to deliver earnings surprises relative to expectations. Within the short book, targeted alpha is generated by shorting companies expected to miss earnings.
In addition to bottom up risk taking, the team will overlay various deliberate and diversified top down macro views in order to generate strong absolute returns throughout the market cycle.
1. Certain risk guidelines and/or limits are provided for information purposes only and represent current internal risk guidelines. There is no requirement that the strategy observes these limits, or that any action be taken if a guideline limit is reached or exceeded. Internal guidelines may be amended at any time without notice.