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INVESTMENT MANAGEMENT


Value-oriented strategy brings rewards


MAPLE-BROWN ABBOTT SAYS THE ASIAN REGION REMAINS WELL-SUPPORTED VIA STRONG BALANCE SHEETS IN BOTH THE PRIVATE AND PUBLIC SECTORS AND A WELL-CAPITALIZED BANKING SYSTEM, WHICH OFFERS SCOPE FOR RELATIVELY HIGH NOMINAL ECONOMIC GROWTH.


Q How does your investment philosophy fit with Asian markets?


A Our disciplined value philosophy positions us ideally to exploit the inefficiencies we often observe in Asian


equity markets. We believe that by adopting a longer time horizon, we can take advantage of significant mispricing events that often arise through the inherent short-term, trading-oriented nature of Asian markets. A strong body of empirical and academic research also supports the long-term outperformance of a disciplined adherence to a value-oriented strategy in Asia, just as in the rest of the world. Being a privately owned and independent investment manager also allows us to offer our clients a complete alignment of interest in constructing genuine high-conviction portfolios.


Q What are investors looking for from Maple-Brown Abbott?


A Investors in our products are typically seeking exposure to a high-conviction value-oriented portfolio


designed to outperform the equity market over a three to four-year investment horizon by two to four per cent a year. Common features of our portfolios include a much lower than average turnover (hence minimizing transaction costs), superior valuation support including a higher than average dividend yield, and a lower than average level of volatility versus the market. All individual portfolio holdings have been subject to significant due diligence by our team of equity analysts, with close attention paid to the financial strength of the company and relevant governance factors.


Q Where do you see Asian equity markets heading in the medium to long term?


A Although the Asia ex-Japan region has significantly outperformed the broader global equity market for over a


decade, we continue to assess the long-term prospects for the region as favorable. Specifically, the Asian region remains well-supported via strong balance sheets in both the private and public sectors and a well-capitalized banking system, which offers scope for relatively high nominal economic growth. The most obvious near-term risk for Asia is a significant retracement in corporate earnings in response to slower global growth, although the market appears to be discounting this risk to some extent given that the region is trading on a forward price-earnings multiple of approximately 10 times. Over the longer term, significant potential for a sustained re-rating can also be found via the potential for individual companies to lower their cost of equity through better corporate governance and capital management initiatives.


Q How does Australia fit into this scenario?


A Australia as a more developed economy with relatively slower economic growth rates has typically been a more defensive market within the Asia-Pacific region. Although both of these factors remain in place, in recent years Australia has benefitted significantly from the industrialization of key economies such as China and India. This, coupled with its existing high trade exposure to Japan, means that it is now more integrated with the broader Asian region than ever before. This thematic has manifested itself most notably through the significant earnings growth and outperformance of the resources sector. As is the case in the rest of Asia, we are identifying many individual stock opportunities that offer compelling long-term valuation support.


Q & 64 FAMILY OFFICE: ASIA TOMORROW


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