Labour-intensive approach to stock picking pays off
Good stock picking and hard work have paid off for Value Partners in the three-year Hong Kong equity category, according to managing director Cheah Cheng Hye.
His Value Partners A Fund achieved a positive return for each of the past three years: 21 per cent last year, 46 per cent in 2001 and 10 per cent in 2000, while the Hang Seng index fell by 16 per cent, 24 per cent and 13 per cent respectively.
The Value Partners A fund won the three-year Hong Kong equity category and another fund managed by Mr Cheah, as chief investment officer under the Manulife brand, won in the Equity Greater China category. The fund is the Manulife GF China Value fund.
Manulife also won an award in the European emerging markets equity sector over three years.
Mr Cheah says the three-year award for his company is due to a major effort by his team of five fund managers and six other investment professionals.
'The full-time job of our analysts and dealers is basically looking for new ideas. We got it right in a number of ways. One is our emphasis on high-dividend stocks. In an environment of deflation and declining interest rates, those dividends came into big demand and we benefited accordingly,'' Mr Cheah says.
Companies held by the Value Partners A Fund carry an average dividend yield of about 5 per cent compared with the market average of 3.2 per cent to 3.5 per cent.
'Dividends need to be high but they also need to be consistent for our portfolio,'' he says.
As a bottom-up stock-picking fund, Mr Cheah's team carries out hundreds of company visits every year.
'Last year we did about 500 visits across Hong Kong, mainland China, Korea, Taiwan and the South East.''
The A fund is 76 per cent invested in listed Hong Kong stocks, but its mandate allows some regional holdings. Mr Cheah says the fund prospered by focusing on Hong Kong listed firms exposed to the mainland economy but controlled by Hong Kong or Taiwanese entrepreneurs.
'Our approach is very much stock by stock. There is no attempt to pick the market direction or have a macro view,'' Mr Cheah says. 'We visit companies one at a time and take a view on their individual merits. It is very labour intensive. There is no real secret or magic formula.''
Mr Cheah says he is optimistic for the business as it rose from US$130 million in 1997 to about US$580 million under management.
Eric Ng, assistant vice-president and chief operating officer, Manulife Asset Management, says the GF China Value Fund, winner of the three-year Greater China equities sector, is part of Manulife's Funds Direct stable of funds, which are managed by selected third parties. Manulife's other three-year winner, in the three-year European emerging markets sector, is managed by the London-based Charlemagne.
'The key thing is we have picked the right people to handle our mandate,'' Mr Ng says.
The performance of the Manulife China Value fund has been eye-catching. It was up 91.45 per cent in the three years to December 31, compared with the CSLA Greater China index, which was down 32 per cent.