We discuss with Ernest Yeung, Board of Director, T. Rowe Price Hong Kong, on what makes a great asset manager.
Germaine Share: Hi, I am Germaine at the Morningstar Hong Kong Fund Awards 2019. I'm joined here today with Ernest Yeung, board of director for T.Rowe Price Hong Kong.
Hi Ernest, congratulations on the best equity fund house win as well as being with us here today.
Yeung: Thank you.
Share: What are some of the competitive advantages that you think the firm's equity investment process holds that has enable such consistent performance.
Yeung: I think I can give you two answers. The first one is being long term. In our industry a lot of industry players talk about being long term mean investing for long term, but I have a different perspective too. Not only we are investing for long term, however if you look at the history of the product that we launch in the US, they have stood the test of time. Some of the funds and portfolio that we offering in Hong Kong market place they've been through Asian financial crisis, they've been through the recent emerging market crisis in 2015, they’ve been through the Lehman crisis in the US, some of them even have the history being through the financial crisis in the 80’s, so I think that's a very important thing - these products are not just some fly by high-performance, high-volatile product that disappeared after few years, and we're going to be very active in this market place over time and we're going to launch a lot more product too. So, for our client, we hope that they will understand that those new products will be around in the next 20-30 years, they do not need to worry that we are just here to gather asset, but they would disappear in five years.
The second thing I would say is day in day out we think investment excellence driving performance is very important. So not only are investors is travelling around the world kicking ties researching companies, but at same time when they're back in office we collaborate with fixed income team, equity team and multi-asset team to come up with our own insight. Insight is what drives investment performance we can’t just follow the trend and invest in company that everyone's is investing in.
Share: Great, you raised a really good point about the importance of the investment team. Being such a long tenured member of the team yourself, what are the key attractions or kind of success factors that have enabled you to build such a long career with the firm.
Ernest:
Yes, some of our experienced portfolio managers has been with the firm for minimum of 16-17 years, some even around for 20-21 years. So, we really have that bench within the firm. They are supported by a one of the largest research teams in the industry globally. Within equity team we have 160 people looking at companies around the world. And closer to home, in emerging markets, we actually have thirty people researching emerging market companies, so that team need to work well with each other and we keep collaborating with different geographies, different sectors and with different asset classes and we think that team is bread and butter of what generate insight for us.
Share: Speaking of the investment team, are there any areas you look to beef up the team?
Yeung: Well definitely. Let's take the example of Hong Kong where we're sitting in today. In Hong Kong, we have around 20 equity investors, with around 5 fixed income investors and 3 multi-asset professionals. One pocket that we've been putting a lot of money into is the A-Share, Shanghai and Shenzhen-listed markets. Recently, we hired 2 to 3 full time experts just researching ideas in that pocket.
Share: Right. So, it sounds like there's a lot of investments being made in the emerging market capability and I understand that's where your realm at. So, switching gears a little bit, what is your outlook for the region and where are you finding opportunities.
Yeung: One thing I would say to general investors, emerging market is actually very interesting. When compared to the more developed market opportunity set, such as US, Japan and Germany, they are actually 5, 8, 10 years into a macro or fundamental up cycle. Stock has done very very well, valuation is not as cheap as before. However, if you look at emerging market, we've hit a trough only in quarter one of 2016. And we are roughly 2 years, 2.5 years into a fundamental up cycle. We still finding companies making absolutely the right decision on allocating capital, setting up management incentives, trying to avoid the mistakes they have made in the recent past. So, I'm actually very optimistic in this asset class, and we think there's a lot of attractive return to come in emerging market.
Share: Great! So wrapping up do you have any final words of wisdom for investors that are looking to invest in an equity fund this year?
Yeung: I think there's a lot of debate on whether investors should buy a passive or active fund, that a big debate going on right now. For us, we are an active manager, and what we do the first thing is not to cut fees but to deliver excellent investment performance to a client. And we look at all our performance data base on net of fees basis, we think that if as long as we can drive very good performance and then we can justify charging a fee and we don't have to compete with our competitors on just racing to the bottom of the fee ladder.
Share: Right.
Yeung: So, the first thing is not fees. The first thing is to generate that investment insights and having that investment performance, and I hope that over time when clients choose mutual funds and strategies, that's something that they would focus on as well.
Share: Great thank you so much again and congratulations on the win.
Yeung: Thank you very much.
Share: Thank you.
View all Morningstar Hong Kong Fund Awards 2019 articles here.
