In this series of short profiles, we ask leading fund managers to defend their investment strategies, reveal their views on cryptocurrency, and tell us what they'd never buy.
This week our interviewee is Vivek Tanneeru, Portfolio Manager at Matthews Asia, where he runs funds including the 5-star rated Asia Small Companies, Emerging Markets Sustainable Future, Emerging Markets Small Companies, and Asia Sustainable Future Strategies.
Which Sector Shows the Biggest Promise in 2023?
As a bottom-up investor, I am acutely focused on company-specific situations but if one takes a medium- to long-term view there are some attractively positioned but mispriced opportunities in areas such as industrials, financials and technology hardware.
What's the Biggest Economic Risk Today?
Developed world inflation is the single biggest economic variable that I am monitoring. I don’t doubt that the battle against inflation will be won but how it is won will matter enormously for the markets. For emerging markets, the biggest long-term risk is geo-political, emanating from the potential mishandling of friction between the world’s two largest economies, the US and China.
Describe Your Investment Strategy
For our sustainable future strategies, we invest in companies across the market cap spectrum that are fundamentally attractive and drive positive environmental, social and economic outcomes while also managing the "outside-in" impacts well. For our small companies strategies, we invest in businesses that benefit from strong consumption and innovation trends across Asia and other emerging economies while also focusing on the under covered parts of the market. In addition, we strongly emphasise good and/or improving all-round governance.
Which Investor Do You Admire?
I have particular admiration for investors that are not only exceptional at what they do but also have invented or mainstreamed new and innovative approaches to investing – as Warren Buffett did with value and quality – focused investing and Jim Simons with quant investing. I believe sustainability investing presents the ultimate mountain to climb for the current generation of investors.
Name Your Favourite 'Forever Stock'
I don’t believe such a thing exists given that the only constant in the world of investment is change, driven by innovation, disruption, competition, changing societal/consumer preferences and regulations. This is where active managers can truly shine by running concentrated and high-active share portfolios while also owning select stocks for seven-to-10 years at a time. Some of these stocks will select themselves for one or more seven-to-10 year-holding periods but identifying them systematically decades ahead of time is exceedingly hard.
What Would You Never Invest In?
Philosophically I am opposed to investing in tobacco and companies that owe their success to their closeness to people in power. From a business perspective, I rarely invest in fossil fuel companies as they generally require enormous capex outlay upfront and experience highly variable demand and supply conditions in the medium term and declining demand over the long term. In addition, they have very little to no pricing power which leads to both uncertain quantum and trajectory of returns over the long-term.
Growth or Value?
Value. I believe all investing is value investing in that you have to buy an asset that is inherently worth more than it is priced at when you buy it. The reason for mispricing might be either because the market underestimates the long-run earnings potential of a company (in case of a typical growth stock) or misprices the replacement value of a given company’s assets or near-term earnings (in case of a typical value stock).
House or Pension?
Depends on the underlying economic environment. Owning an income-generating property can satisfy the need for a steady income stream (a pension) while also providing the emotional security that comes with owning the roof over one’s head.
Crypto: Brilliant or Bad?
I have thought of cryptocurrency as a purely speculative asset that requires a bigger speculator to buy it off you at a higher price for you to make money, with no underlying cash flow to support any kind of price floor.
What Can be Done to Improve Diversity in Fund Management?
Deliberately and systematically addressing fundamental issues such as entry level positions in the industry while also working with set percentage diversity targets at senior management and board levels.
Have you Ever Engaged with a Company and Been Particularly Proud (or Disappointed) in the Outcome?
We have been heartened by our engagement with an electric vehicle (EV) supply-chain company that had an industrial accident and some governance challenges and how quickly and comprehensively it responded to make substantial changes.
What’s the Best Advice You’ve Ever Been Given?
It was not explicit advice as such but I vividly remember my father, when he got promoted to a new role in his late 40s, spending hours with a dictionary to improve his vocabulary as English wasn’t his first language. Even today in his late 70s, he is curious and enthusiastic about learning new things. Influenced by that, I find it incredibly enriching to constantly seek out new learning and personal growth opportunities.
What Would You be if You Weren’t a Fund Manager?
This is hands down the best job I have ever had and will likely ever have. If my job never existed I would have been a political analyst and a policy wonk as I’m fascinated by the impact of policy making, especially on economics, which in turn has the power to make or break the well-being of vast populations over the long term.
