Eyeing up golden stars in Asia

While still remaining defensive, Rob Jeffree is looking to the future and exploring opportunities in materials, small caps and Thailand that will perform well for the New Star Asia Portfolio.

After taking an increasingly defensive stance in large caps and cash in 2008, Rob Jeffree is positioning New Star Asia Portfolio for a market rally.

Jeffree, who assumed control of the £16m fund of funds last January, is considering increasing his exposure to small caps, materials and Thailand.

“Our view is that the market has been in a bottoming process since October,” says Jeffree. “The fund is still defensive, and I am particularly worried about first quarter earnings in Asia as a whole – we may see new lows in March and April. But I am trying to look through that and to tee-up opportunities that will perform well.”

To boost his small cap weighting, Jeffree is looking at Atlantis Asian Recovery – a former holding in the New Star portfolio. According to Atlantis, the Ucits III Dublin-
domiciled fund held almost 60% of its assets in stocks with market capitalisations of under $500m (£350m), at the end
of January.

One of the candidates for increased Thai exposure is Ton Poh Emerging Thailand – a concentrated portfolio of 10-15 stocks, run by Bangkok-based Hunters Investments.

“I am looking to invest in beaten-up markets, including Thailand,” adds Jeffree. “The manager [Jeep Chatikavanij] has been running Thai money for a long time.”
New Star Asia Portfolio’s exposure to materials
comes from Oceanic Australian Natural Resources. As
Fund Strategy reported on October 27, 2008, trading in the Oceanic fund was temporarily suspended because
of concerns over market liquidity. Normal dealing
resumed in November, however, as redemptions slowed.

The fund held 13.2% of its assets in precious metals at
the end of January, and Jeffree is particularly bullish
on gold.

“Gold is trading at $940-950 [an ounce] and, if you are long, it is a good time to lighten up,” he says. “But long-term, gold is a brilliant investment. The dollar has got to weaken with the sheer volume of money being printed and I also like it for supply reasons.”

Jeffree remains overweight in China, but swapped his stake in Atlantis China Fortune for the iShares FTSE/
Xinhua China 25 Index exchange-traded fund, in the first half of 2008. The change was part of Jeffree’s drive to move up the cap scale, and he remains upbeat on the outlook for domestic Chinese consumption.

In fund terms, the New Star portfolio’s biggest holdings are Prusik Asia and Schroder ISF Asian Total Return – both of which have a 20% weighting. Jeffree added the Schroder fund at the end of last year, but Prusik Asia – which is run by Heather Manners and Ed Buckley – is a longer-term investment.

“Heather Manners is good at latching on to themes, such as soft commodities, water, gold and medical diagnostics,” says Jeffree. “The fund also has a strict valuation discipline which suits these markets. It has done very well – last year the dollar share class was up by 40% relative to the index.”

New Star Asia Portfolio’s returns were boosted by the use of dollar share classes in 2008, but Jeffree is hedging dollar exposure this year.

Regional funds of funds over one and three years