30.01.2015

WSF ASIAN PACIFIC FUND

For some investors, ethics can play as large a part in where they put their money as anything else. The WSF Asian Pacific Fund allows investors to meet their ethical needs and gain financial reward, offering access to some of the most economically dynamic markets in the world and an investment sector that has grown dramatically in recent years.

 

GROWING MARKET

The ethical investment industry has grown dramatically in the last decade. In the UK alone, ethical investments have almost trebled in the past 10 years, according to the responsible investment research firm EIRIS. Socially-aware investors with a desire to invest responsibly looking to financial products that meet their investment needs but also adhere to their ethical or religious values have helped drive this growth. But such products have also benefitted from the fact that investors have become more aware of the range of such products available, and realised that this type of investment does not necessarily involve any sacrifice in terms of potential investment returns. Many have been drawn, in the wake of the financial crisis, to the fact that, as with the WSF Asian Pacific Fund, many ethical funds do not invest in companies with high levels of debt. During the financial crisis the shares of highly indebted companies fell dramatically. The WSF Asian Pacific Fund has strict criteria that veto investment in any company with debt levels above a certain threshold.

 

As Ian Lancaster, CEO of Cogent Asset Management Ltd and portfolio manager for the WSF Asian Pacific Fund, explains: “The Fund is suitable for any investor who holds strong social ethics, i.e. does not want to invest in the alcohol, gambling or tobacco sectors, is sceptical about the value added to society by the conventional banking system, and who wishes to invest in companies that are conservatively financed with low levels of debt.

“The range of equities we pick from offer access to a universe of financially conservative companies that have delivered good historic investment returns at relatively low levels of volatility. Such attributes have the potential to enhance any investor’s portfolio.”

 

DYNAMIC ECONOMIES

Boasting attractive fundamentals for investors such as more than a third of the world’s population, rapid urbanisation and growing demand, the Asia Pacific region offers fertile ground for anyone taking a long-term view of their investments. The Asian Pacific region is one of the most economically dynamic in the world. Its on-going structural transformation, increasing productivity and favourable policy climate will continue to support healthy growth in the long-run while it has a number of fundamental advantages over other developed and emerging market regions, including:

 

  • The Asian Pacific region is home to more than a third of the world’s population – 3 billion people – providing a base for future economic strength.
  • Urbanisation is accelerating and with it economic growth driven by the sheer number of people with increased spending power. This rapid urbanisation will also drive greater infrastructure spending in coming years, fuel demand for energy and lead to a rise in employment and higher standards of living.
  • The Asian Development Bank forecasts that by 2030, Asian Pacific nations will account for 43% of global consumption. Between 2012 and 2050, this will lift the Asian Pacific nations’ share of global GDP from 29% to 49%.
  • Compared to developed economies, expected economic growth is higher for Asian Pacific markets. The base level of GDP is lower, the populations are much younger and the political and economic systems are changing with positive effects on the efficiency of the economies.
  • Wealth is being spread to create emerging professional classes and savings rates are high.

 

As Ian Lancaster explains: “The WSF Asian Pacific Fund has exposure of around 70 per cent to Australia, China, South Korea and Taiwan. These dynamic economies provide the fund with a fascinating exposure to natural resources, technology and the compelling Chinese growth story.”

 

STANDING OUT FROM THE CROWD

The portfolio manager’s equity selection process sets it apart from mainstream investors. The investment advisor uses their unique ‘Cognition’ dynamic multi-factor stock screening process. Cognition systematically sifts through thousands of data items in the Fund’s investment universe to identify companies with characteristics that give them the potential to outperform its benchmark. This proprietary investment process differs to that used by mainstream investors in that the investment advisor observes most of the fundamental indicators that traditional investors analyse, but analyses the data in a consistent, repeatable and systematic way. The fund invests in companies that offer the most

compelling combinations of value and momentum at any point in time and performance is therefore driven by the ability of the investment process to focus the portfolio on companies that offer the optimal exposure to attractively valued companies with improving fundamentals. Using this investment process, the investment advisor picks around 40 equities for the portfolio from a comprehensive universe of 1,000 Asia-Pacific equities.

 

 

OUTLOOK

The longer term prospects for the region are good given the ongoing structural drivers of urbanisation, industrialisation and positive demographics. But near term volatility should not be ruled out as the market comes to terms with a slower global growth scenario. The situation in China also has to be watched carefully. The economies of the countries that the Asian Pacific Fund invests in depend very heavily on their economic connections with China. Over the last few years, investors have been rightly concerned about the health of the Chinese banking sector. However, much has been done by the Chinese authorities to stabilize the domestic banking system and property market and the authorities have immense power and huge financial resources at their disposal. The Fund, though, is uniquely well positioned to cope with divergent fortunes in the region’s economies, given the nature of its expert-system investment process. The portfolio manager does not seek to outperform the market by taking active bets on sectors or currencies, but rather by understanding the prevailing economic environment in its investment region. Trading is therefore undertaken to realign the portfolio towards dominant investment themes.

 

INVESTMENT ADVISER

The founder directors of Cogent Asset Management Ltd have previously managed award-winning and top performing funds across various categories. The team has developed a propitiatory strategy for managing equities through a process driven and systematic approach to investment which rigorously implements stock selection based on quantifiable fundamental criteria. As of May 2014, the company had assets under management of USD35 million.

 

 

IMPORTANT NOTE: This report has been prepared for information only, and it does not represent either an offer to purchase or subscribe to shares of any Cell, or an advertisement for countries where the Cells are not registered for sale. Trident Fund Services (Guernsey) Limited and World Shariah Funds PCC Ltd (the „WSF“) are licensed and regulated by the Guernsey Financial Services Commission under the Protection of Investors (Bailiwick of Guernsey) Law, 1987 as amended. Company Registration Number: 51802. WSF believes that the information is correct at the date of production while obtained from carefully selected sources considered to be reliable. No warranty or representation is given to this effect and no liability can be assumed for the correctness or accuracy of the given information which may be subject to change at any time, without notice. Past performance provides neither a guarantee, nor an indication of future performance. Value of the shares and return they generate can fall as well as rise. Currency fluctuations, either up or down, may also affect value of the investment. Due to continuing market volatility and exchange rate fluctuations, the performance may be subject to significant changes over a short-term period. Investors should be aware that shares in the financial instruments entail investment risks, including the possible loss of the invested capital. Performance is usually calculated on the basis of the relevant NAV unless stated otherwise. Performance shown does not take account of any fees and costs associated with subscribing or redeeming shares. It is assumed that all dividends were reinvested. The full documentation required to make an investment, including the Scheme Particulars is available and may be obtained through Trident Fund Services (Guernsey) Limited or www.wsffunds.com. Before investing in any WSF Cells investors should contact their financial adviser/legal adviser/tax adviser and refer to all relevant documents relating to the WSF and its particular Cell(s), such as the latest annual report and Offering Memorandum and relevant Supplement that specify the particular risks associated with the Cell, together with any specific restrictions applying, and the basis of dealing. In the event investors choose not to seek advice from a financial adviser/legal adviser/tax adviser, they should consider whether the WSF is a suitable investment for them.