In this new series of profiles, we ask leading investment fund managers to tell us everything from their investment strategy, to their views on the biggest current economic risks, their favourite forever stocks, the best piece of advice they’ve ever been given and what they’d never invest in.
This time, our interviewee is Joanna Kwok, manager of the Morningstar Bronze-rated JPM Asia Growth Fund.
1. What’s your investment strategy?
To invest in growth companies that can deliver superior returns in the long-run, particularly those exposed to the structural changes driving Asia’s dynamic growth. We are not trying to second-guess politics because it doesn’t add much value. We are bottom-up stock pickers, focused on finding the quality companies that continue to have superior performance.
2. What's the biggest economic risk right now?
How long Covid-19 persists as a health risk is crucial for economies and financial markets. Vaccines are allowing a path to normalcy for some markets, but many emerging markets are still grappling with controlling the spread of the disease, with parts of Asia now witnessing further lockdowns.
3. What's your favourite forever stock(s)
WuXi Biologics (02269), a Chinese pharmaceutical company. It has become one of the world leaders in its approach to drug development. We bought it in March 2018 and the share price has now more than doubled. I’m fortunate to have one of the largest investment teams, supporting me and they identified this company very early on so we invested.
4. Which sector provides the biggest investment opportunity in 2021?
Rising incomes in Asia will probably be one of the key investment opportunities of the 2020s and is materially underappreciated by many of the world's growth investors. The Asian middle class will grow by about 1.2 billion people by 2030. China alone is already responsible for 35% of the entire world's global demand for luxury goods. Indeed, China's GDP and incomes should be about 50% larger by 2030. That is an expected rise in incomes to $15,000 per person. Multiply that by China's 1.4 billion people -- that is a real increase in consumption of about $7 trillion, larger than the current size of the German and UK economies combined.
Higher disposable incomes will drive consumer consumption of everything from soy sauce to technology, and hotel stays to leisurewear. We currently hold Shenzhou International (02313), an integrated textile company, which benefits from higher discretionary spending from Asian consumers. This company places great importance on ensuring the supply chain behind their apparel is ethical and fair. ESG is very much integrated into our decision making and is a top priority when engaging with management.
5. What would you never invest in?
I would never invest in a company we didn’t fully understand, with management that we trust to do the right thing for all stakeholders.
6. Growth or value?
We focus on long-term quality growth, looking for opportunities in profitable companies that offer sustainable returns and growth prospects, and investing only in those stocks that our portfolio managers, country specialists and sector analysts have conviction in.
7. What can be done to increase diversity in the fund management industry?
I have been very fortunate to work with a team of people for a long time where there is meritocracy and everyone is respected, I think this is key to increasing diversity. I think this really helps in maintaining a collegiate environment and this contributes to the performance. Everyone has the responsibility to strive for a fairer work environment and I try to do my part through my interaction with my colleagues and through our internal networks. A more inclusive culture is beneficial for all.
8. What's the most exciting emerging trend in Asian markets?
The speed of development, driven by consumer demand and primarily centred around technology. If we think about sectors - consumers, financials and technology space all offer growth. I think what is so exciting is how broad those areas are – financials are a lot more than just banks, and in technology we have software and the cloud, all the way through to flat screen manufacturers.
9. What's the biggest misconception about investing in Asia?
Investors worry they have missed the opportunity to invest given strong returns in recent years. The sheer size of populations across the region means that millions of individuals are becoming middle class consumers every year, and it is estimated that over 1.2 billion consumers will enter the middle class in Asia by 2030. This is a multi-decade story.
10. How did Covid-19 change your portfolio?
Despite the evident volatility and uncertainty that Covid has caused, our portfolio didn’t change much – experience has shown us that strong companies, with robust balance sheets and quality management tend to be more resilient, and that these are the sort of companies who weather storms better and often grow market share.
11. What's the best thing about being a fund manager?
You never stop learning.
12. Best bit of advice you’ve ever been given?
Be curious.
13. What would you do if you weren’t a fund a manager?
Although I love being a fund manager, I do like the idea of being a travel blogger. There is something about traveling around the world, staying in different amazing places and hotels which definitely appeals to me!
