An update from Henry Thornton on opportunities in Asia

I recently caught up with Henry Thornton reflecting on the forthcoming 2nd anniversary of his move to Garraway from Blackfriars - a move which saw the launch of VT Garraway Asian Centric Global Growth Fund (VTGAC) and the arrival of what became the Garraway Oriental Focus Fund (GOFF).

How are you finding working at Garraway?

“It’s been great having new colleagues to work with. With the endless lockdowns limiting the ability to spend time together in person, I still think the working relationship between myself, Tim (Hall) and Malcolm (Schembri) has been building well over time. I’m drawn to Malcolm’s endless quest for quality and focus on measurements such as ROIC. To use a nasty phrase, we are ‘on the same page’!”

Have you made any changes?

“Nudged along by Tim in particular, the emphasis of GOFF’s portfolio has shifted significantly since my arrival at Garraway and especially since March 2020:

  1. Frontier markets. Zero exposure after exiting positions in Sri Lanka and Vietnam;
  2. ASEAN – the significant overweight position has been eliminated;
  3. Market Cap – while 40% of the portfolio holdings have a market cap of under $10bn, there has been a deliberate attempt to eliminate ‘tiddlers’ and increase positions in larger cap holdings. Stock ‘bets’ versus the index have been reduced significantly;
  4. Exposure to China and North Asia, but Taiwan in particular, have been significantly increased. For the past eighteen months, following a successful visit to Taipei in November 2019, Taiwan has been the market that kept on giving. Aside from short term moves, I don’t see this changing;
  5. The portfolio is much better balanced. There is a ‘tilt’ to new economy holdings which account for just over 50% of the portfolio. A further 8% is committed to EV plays and a hydro power producer. The remaining c40% is old economy but with a focus on ‘best in class’. Examples include China Merchants Bank, AIA, JNBY, LG H&H and Ayala Land;
  6. One aspect of the portfolio has not changed and that is its focused nature with just 28 holdings at present (usual range 25-30). The Top 10 represents 55% of NAV currently - I’ve not found many funds with more than 40% and most sit in the 30-40% range. I will continue to run this as a high-conviction fund.”

Did they work?

Recent performance has been strong. One-year numbers are already first quartile, and this should reflect in the longer-term numbers as time goes on. (Performance since launch is pasted below.).

Further information is available via the Fund’s page on the website and includes more details about the investment process as well as the fact sheet.
Is VT Garraway Asian Centric Global Growth Fund also an Asian Equity fund?

“Combining Malcolm’s skills in developed markets (c.50%) and my efforts across Asia (c.40%) together with a measured exposure to Garraway Financial Trends and precious metals (c.10%), VTGAC is essentially a global equity product which uses this modest ‘risk budget’ to reduce volatility in order to help deliver a superior risk/reward profile.

China has emerged as a global economic powerhouse over the past thirty years and, having dealt successfully with the pandemic, is likely to continue to grow rapidly. This will continue to have a significant positive economic impact across the Asian region where, broadly speaking, favourable demographics remain a tail wind for growth prospects.

VTGAC is designed to take advantage of these long term positive structural factors.

I also think it is very important that VTGAC is seen as a complimentary product to Garraway Global Equity Fund and not a competitor.”

Further information is available via the Fund’s page on the website and includes more details about the investment process as well as the fact sheet.

Barry John