Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Fay Ren, she's manager of the Cerno Pacific fund. Hello.
Fay Ren: Good morning, Holly.
Black: So, do you want to tell us first, what the fund does?
Ren: Yes. So the Pacific Fund invest in a concentrated portfolio of high-quality innovative companies across the entire Asia Pacific region.
Black: So obviously, you're looking at the whole region, but I think China tends to take centre stage when we think about the Pacific area. And there's loads going on there at the moment, particularly this regulatory crackdown. So how do you think about that in the portfolio?
Ren: Yes, so China is a very big part of the portfolio. And we are invested in the new economy sectors, which had been impacted by recent regulatory crackdowns. But we think, over the long term, it is addressing some of the regulations that have been lacking in a rapidly growing digital economy. So we are actually thinking it will benefit the industry in the long term.
Black: So it might be even a good thing, it makes investors realise there is more to China than just internet companies, from the sounds of things the portfolio is quite broad in that sense.
Ren: Yes, so we have exposure to internet businesses, not just the large ones, but also some of the more niche ones, new smaller players. But outside internet, there is health care, which is a very rapidly growing area, there are industrials, the industrial supply chains such as smartphones, 5G, EVs, which we also have exposure to. As well as some of the more B2B areas where China has lagged developed market, but they are catching up in a very rapid fashion, as well.
Black: So what about outside of China? Where else do you invest?
Ren: Outside of China, we also invest across Japan, Korea, Taiwan, Australia, as well as ASEAN. So Korea and Japan are two of the top five most innovative countries globally, which is part of our mandate. Both are very deep markets with very advanced technologies. So we have a lot of exposure there. And in the ASEAN India region, there's a lot of startup activity and lot of new business models coming through which we are also monitoring very closely.
Black: So you've obviously got this focus on innovation in the fund. Why is that so important to you?
Ren: Because we think Asia has historically been the consumer story where a lot of Western multinationals have been extremely successful in selling into these markets. And Asia had historically again been the low-cost manufacturer for the world. But as the economies become more wealthy, and there are more middle class with higher demands, local players have actually been taking market share and have become more sophisticated over time and have accumulated a lot of industry knowledge to move into the next step. And we think that is going to be the next stage in the Asian markets. China, in particular has been the poster child for this transition. Japan and Korea have already become global innovators in their own right.
Black: Fay, thank you so much for your time. For Morningstar I'm Holly Black.
