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SCMP Reporter

The company's strength is in the stability of its Asia and Japan categories and its commitment to the region

Years of ploughing the fields in Asia is paying off for JF Asset Management as it harvests two of the three group awards in the SCMP Fund Manager of the Year Awards  2003.

The consistent performance of its stable of funds was the key determinant in it winning the Best Performing Fund Management Group Five-Year and Ten-Year Awards, judged on the overall performance of its stable of funds.

In addition, JF Asset Management won sector awards for its JF SAR Japan and JF Japan OTC funds, the funds that helped build its long-standing reputation in Asia.

'We started out as an Asian specialist,' says JF Funds chief executive Douglas Eu. 'We have been here for a long period of time. [The funds with five-year and 10-year track records] tend to be our Asia or Japan funds. Our strength over the longer time period has been in those categories where we have continuously operated funds.'

Mr Eu believes the group's staying power and consistent presence in the region is why competitors have come and gone while JF is still going strong.

'Ten years ago, I would have had a completely different list of competitors in my head. This year we are competing against Threadneedle. Five years from now we may be competing against someone else. This is not to say that the competitors 10 years ago were not very good. It's just that, in terms of commitment, we feel that we'll always be here,' he says.

Having consolidated its reputation on the back of strong Asian and Japanese funds, JF has built on its traditional strength by merging with other  groups to expand its  list of funds.

'In the past three years we have been involved in a number of mergers. The mergers have benefited us by broadening out the range of equities that we as a group have. The merger with JP Morgan has given us stronger and more diverse capabilities in a number of our fixed-income products,' Mr Eu says.

The group's list of funds has expanded to 47 from 37 last year and the total asset size has more than doubled to US$5.5 billion from US$2 billion five years ago.

In the past year, JF has adopted a strategy to introduce absolute return funds designed to offer products that will go in different directions from its existing funds. Three such funds were launched last year and more may be on the way.

'Most traditional funds are based on an underlying asset class. An absolute return fund is one that focuses on making money regardless of what happens to the underlying benchmark. The long-only funds have potential to give you higher returns [but] the absolute return funds give more consistent returns whereby you're able to make money even if the markets are falling,' he says.

'Our business strategy is to offer a wide range of products with uncorrelated returns. Introducing absolute return funds is our way of doing that.'

The strategy is a way of practising what it preaches in diversification, a basic rule for investment that Mr Eu thinks not many investors are adopting.

'Investors in Hong Kong may have a broad understanding about diversification. Most people still look at funds as an alternative to gambling on something else. Most people focus on buying and selling a fund as a way to make as much money as they can over as short a period as they can. We don't think that's the right way to look at funds. To me, when you do that, what you're doing is gambling,' he says.

Funds should be used as an investment vehicle through which fund managers are taking the guesswork out of the diversification process when they apply stringent quality control to screen a fund's components.

'Not every single portfolio is managed identically but the general market views are consistent. Stock views are consistent. We have a rigorous system for ranking stock and making sure that we communicate that to everybody,' he says.

The process  also ensures the performance of the funds remains consistent even when a fund is handed from one manager to another, although that has not happened too regularly, going by the  track record of JF managers. Mr Eu has been with JF for 17 years.

'We are able to keep fund managers,' he says. 'They love working at JF because they know they are on the A team. We run perhaps the most money in the region.  We pay people pretty well.

'You start with the best people. You treat them well. You keep them and you end up with all the other ingredients that matter - good performance that keeps the clients happy and have profitable businesses.'

And that just about sums up JF's secret to success.



Staying power wins top honours for JF