Best for Equity Markets In Asia Ex Japan – Whitefield Asian Opportunities Fund (WAOF)
Source: Wealth & Finance International – Fund Awards 2015
Date: 2015
Whitefield Capital Management
Benjamin Ng started Whitefield in 2000 after 18 years in the investment industry and a couple of years with his family trading company. Benjamin attributes his investment style to his time with the family business which helps him to think like a businessman when he invests. We spoke to him about his mindset and more.
Based in Singapore, Whitefield is a long-only Asia ex-Japan equity boutique. In Whitefield’s investment world there is no stock market index and no esoteric modern financial theories, and everything comes back to basics. Questions such as whether the company has a sustainable business model, or if the company has an attractive asset, or what is the right price to pay for the business or the asset all preoccupy Benjamin and his team. To answer these questions, they scour the Asia ex-Japan universe looking for cheap growth, cheap assets and cheap cashflow.
Whitefield’s hunting ground covers companies of all sizes but the team tends to be biased towards the small and mid-caps. This is primarily because they tend to be overlooked by sell-side research. However, investing in overlooked companies requires lots more work. The team resorts to primary sources of information such as quarterly reports, annual reports, prospectuses, company announcements and chairman statements. It involves painstaking effort to understand how a particular business is run, investigating aspects such as growth drivers, competitive landscape, competitive advantage of the company, cashflow and capital management, corporate governance, risk of the business. Meeting management is not done until the last stage after there has been thorough research on publicly available information.
Because of the intensity involved to arrive at an investment idea, the number of names in Whitefield’s portfolio tends to be small. Right now there are only 18 names. Fewer names mean bigger positions, and this makes the team think more thoroughly and critically before investing as well as sharpening the thinking process. In contrast, a 100-stock portfolio means an average 1% position size and one can be lulled into complacency trusting in the law of diversification.
Whitefield’s clients are mainly institutions including an Asian sovereign wealth fund, wealthy families, charitable trusts and foundations. High net-worth individuals make up a smaller part of the assets under management, and the lion share of the assets is from Europe. Other client domiciles include Asia, Australia and the US. Whitefield’s clients have access to big global asset management firms but chose Whitefield because of its niche investment style.
The key to success in investment, in their opinion, is firstly to distinguish between what’s ‘hot’ and what’s ‘sustainable’. Hot trends (new emerging markets, new technologies, new fashions) attract a lot of investors’ attention often resulting in excessive expectation and over valuation. From their perspective, investors catching hot trends tend to end in tears because such trends do not last.
Rather than trying to be the first to catch nascent trends, Whitefield focuses on sustainable long-term trends. Such trends may not be described as ‘sexy’. To Whitefield a predictable long-term 10% growth rate is preferred to an expected low-conviction 20% growth.
This helps Whitefield to avoid unnecessary risk by overpaying for an investment, which is in line with the firm’s bargain-hunting orientation. At the same time, that orientation helps Whitefield to be alerted to ‘bargains’ early enough.
The second key to successful investing for Whitefield is not to try to look for trends in all industries. Instead Whitefield trains its resources on those industries it understands and which possess the moats and characteristics that it likes. Not all businesses are investable and worth researching going by Whitefield’s criteria.
With a small but experienced team, Whitefield’s key members have been around for a long time. The organisation has a flat, informal structure, and the smallness of the organisation allows for good interaction and discussion. It promotes teamwork not star-performers. That being said, latitude is given to senior team members so as not to stifle creativity.
The long stay of senior team members (in an industry where staff turnover tends to be high) is testimony that Whitefield has done something right in terms of management style. Whitefield plans to remain a boutique and operates in a sweet spot that the big boys cannot because of their size. The firm likes working closely with long-term clients who understand and appreciate its long-term investment approach. Without stable money, the style will not work.
Clients have been with Whitefield for a long time, some dating back to its incorporation. They are more friends than clients now and many have acted as references for Whitefield’s prospects. For that they are most thankful and satisfied.
As for the award, the firm find it encouraging to be recognised. Furthermore, they find it very satisfying to practise what they strongly believe in and see the positive long-term result. Winning this award is a recognition that the long-term, index-agnostic, value-oriented investment approach can work in what is often touted as high-beta Asia-ex Japan equity markets which favour short-term trading investment style. They hope this award can serve as an encouragement to all value-oriented long-term investors in the industry – both managers and clients.
