Youn-chou chong restructures UK portfolios to mirror group's asian investment process
Youn-Chou Chong has restructured Aberdeen's UK desk to mirror the group's Asian investment process and revamped the group's UK fund range.
Aberdeen UK Blue Chip has had its holdings cut back from 85 to 45 and will constitute Aberdeen's flagship UK fund, while its UK Growth portfolio, which Chou has trimmed from 103 positions to 45, will be managed more along institutional lines.
Chou, brought in to head up UK equities after performing a similar turnaround task at the group's Australian office, took the reins of Aberdeen's UK Growth, UK Blue Chip and UK Mid Cap funds upon secondment to the London office last September.
'Performance had been intolerable and needed a radical solution. I came over to lay down a consistent investment process that meets the needs of both retail and institutional clients,' Chou said.
Chou added the investment process, devised by Hugh Young, managing director of Aberdeen Asia, has already been implemented in Singapore, Japan and Australia and is very much bottom-up driven, with an emphasis on in-house rather than broker research.
Investments are only made after company visits have been carried out and the management of companies held in any of the group's portfolios are visited twice a year.
Research notes are now written in a common format and made available to the whole group, while Aberdeen's compliance now logs all research, providing a layer of transparency.
Chou said the emphasis placed on company visits reflects the importance placed on the quality of management within the new investment process. Given this is a subjective input, visits will be rotated between team members to ensure fresh perspectives are gained and encourage a team approach.
This, in turn, is overlaid with fundamental analysis, focusing on a stock's balance sheet, market position, transparency of accounts and board and the stock's current valuation.
'The process was created for emerging markets, where there is always deep-rooted risk at the micro level, and is applicable to all markets. It has worked well in the developed markets of Australia and Japan which are both similar to the UK,' Chou said.
'They are over-researched and the investment community is always looking for the next momentum play. Our process does not allow us to follow momentum, so we may miss out on momentum rallies but will outperform over the medium to long term.'
In reducing the number of holdings in the UK Blue Chip fund, Chou has stripped out underperforming assets and increased conviction in stocks on which he is positive. The fund will be benchmark aware, but relatively unconstrained in its stock selection.
Aberdeen UK Growth will be run with a lower tracking error threshold and a FTSE All-Share plus 2% mandate.
Restructuring is still being carried out on the UK Mid Cap fund, which will be run with a strong growth bias and again become more concentrated.
The funds will typically take 1%-1.5% initial weightings in stocks, which will rise to around 2% as conviction grows and then be reviewed when they reach 3.5%.
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