Dhananjay Phadnis, fund manager "Fidelity Funds - Indonesia A USD" (15.12.2010): "I prefer companies with strong medium-term prospects unrecognised by the market. I place particular emphasis on developing a thorough understanding of the demand/supply balance within industries, as well as analysing the entry barriers within a particular industry segment, in order to assess the sustainability of a firm´s competitive advantage. Stock selection results from bottom-up, detailed fundamental analysis of company and industry. I utilise first-hand company research to evaluate potential investments. I believe frequent company visits are the key to evaluating company specific risk and I work closely with Fidelity´s research analysts to constantly monitor corporate fundamentals."
Magdalene Miller, Manager "Standard Life Investments China Equities SICAV Fund" (16.12.2010): "Standard Life Investments´ investment philosophy is ´Focus on Change´. We look for changes in Industry Structure, Company Behaviour, New Developments that could affect a corporate´s future profitability and cashflow to shareholders and how these factors are reflected in the share prices."
Peter Meier, Fondsmanager des "Quantex Strategic Precious Metal (CHF)" (01.12.2010): "Primär die Geldpolitik der wichtigsten Notenbanken, allen voran des amerikanischen Fed und der EZB. Die inflationäre Geldpolitik ist der Haupttreiber der steigenden Investorennachfrage nach Edelmetallen und damit der Gold- und Silberpreise."
Johanna Keller, fund manager "LO Funds - World Gold Expertise (USD) P A" (08.12.2010): "Gold price has, over the last months repeatedly reached some new historical highs. This year the main driver for the price increase is the investment demand which is high due to the current macro environment, notably fears regarding potential currency debasements following the quantitative easing policies and fears regarding the European sovereign debt crisis. As such, gold as a safe haven asset and a hedge against devaluing currencies appears attractive to investors. Silver which is often considered as a leverage play on gold has benefited from this trend while amplifying gold movements."
Douglas Orsmond, Co-Fundmanager "Craton Capital Precious Metal Fund A" (16.12.2010): "Our bottom–up process means that the most important factors are the valuations of individual companies. Even though underlying metal prices (eg gold, platinum and silver prices) are important to the share price return, stock selection is based on relative valuation against peers who are also influenced by the metal price – so differentiation between stocks is based on company-specific fundamentals.
This requires detailed understanding of the assets (including producing mines and mine development projects) to forecast future production and cash flow, growth in resources and the upside potential as well as risks to each operation or project.
The quality, experience, track record and goals of company management are other important factors in deriving value from a company’s assets.
The location of the assets is important, regarding country (political, legislation and permitting risk) as well as access to infrastructure (existing access, or the cost to establish access to roads, water, power, skills)."
e-fundresearch: "Which sectors are currently overweight or underweight? What are the reasons for it?"
Dhananjay Phadnis, fund manager "Fidelity Funds - Indonesia A USD" (15.12.2010): "Sectors that are currently held overweight:
i. Banking
The outlook for the Indonesian banking sector remains positive given the outlook for robust loan growth. Secular growth is likely to continue given the low credit penetration. The banking industry is poised to benefit from rising per capita income and increased demand for the development of the infrastructure projects. In addition, the recent re-capitalization of the banking sector also offers a good opportunity to position for growth.
ii. Resources (especially coal miners)
Demand for resources from countries like China and India remains robust. Additionally the global monetary situation provides a strong support to commodity prices. Indonesia is rich in resources such as coal, palm oil, tin & nickel. Rising commodity prices will provide a boost to earnings of companies involved in the mining and production of these resources.
iii. Infrastructure
The proposed land acquisition bill will help accelerate infrastructure projects by facilitating speedy land acquisition. It is certainly good news for infrastructure developers and contractors as it will help kick start several infrastructure projects. Expressway operators, contractors and property developers stand to benefit directly from the acceleration of infrastructure development.
iv. Cement
Domestic cement demand could grow strongly on the back of a positive macro outlook. A strong macro, stable political conditions, rising consumer confidence and demand for housing could result in higher property sales and hence higher cement demand. In addition, cement producers could also benefit from the Indonesian government’s rising infrastructure spending and acceleration of infrastructure development.
Sector that is currently held underweight:
Consumer discretionary
• I am less positive on the outlook for consumer discretionary sector due to the rising inflation concern. Rising input costs may undermine corporates’ margins and hence their profitability. Acceleration in inflation may also advance policy tightening action and curb cyclical demand."
Magdalene Miller, Manager "Standard Life Investments China Equities SICAV Fund" (16.12.2010): "We are overweight in Healthcare and Consumer Discretionary. Growth is still underestimated by the current valuation and there are companies that are emerging to be global champions (not just feasting on domestic growth). We are underweight in Financials and Materials. Mammoth companies within these sectors are unlikely to surprise as they are well researched and well understood by the market. Their corporate behaviour is very much subject to government policy."
Peter Meier, Fondsmanager des "Quantex Strategic Precious Metal (CHF)" (01.12.2010): "Übergewichtet sind wir zur Zeit in eher tief bewerteten Minentiteln, welche aus verschiedenen Gründen das aktuelle Rally im Sektor verpasst haben wie IamGold, Gammon Gold oder African Barrick. Auch Large Caps wie Barrick Gold gefallen uns auf Grund ihrer tiefen Bewertung immer besser."
Johanna Keller, fund manager "LO Funds - World Gold Expertise (USD) P A" (08.12.2010): "The LO Fund World Gold Expertise (USD) P A has a mid to small cap bias as we want to benefit from the growth and scarcity embedded in future gold reserves. This means that we tend to be underweight in stocks like Barrick or Newmont while looking to find investment opportunities in companies which would be able to grow their production and their gold reserves in a meaningful way for the firm. We are for instance actually overweight in Osisko Mining."
Douglas Orsmond, Co-Fundmanager "Craton Capital Precious Metal Fund A" (16.12.2010): "We do not make allocations over/underweight on a regional basis, as the fund is invested based on bottom-up stock selection. We primarily invest in mining companies listed on stock exchanges in Canada, US, Australia, South Africa and the UK . We are cautious about investing in countries with higher risks.
The PMF fund is essentially one sector (precious metals mining), amongst the “sub-sectors” of the metal and mining sector; we favour the small to mid cap stocks."
e-fundresearch: "Which investments are currently attractive and what are the reasons for that assessment?"
Magdalene Miller, Manager "Standard Life Investments China Equities SICAV Fund" (16.12.2010): "Apart from the fundamental factors that we always look at listed above, we focus on the monetary policy of the Chinese Government which, according to our assessment, remains broadly supportive of a 8-9% economic growth with a loan growth of 14-15% in 2011. In addition, valuation is very important. The Chinese market is not expensive - the MSCI China Index is 12x 2011 earnings, the average p/e over the last 15 years, and eps are forecast to grow 15% in 2011."
Peter Meier, Fondsmanager des "Quantex Strategic Precious Metal (CHF)" (01.12.2010): "Gold und Silber sind momentan korrekturanfällig, bleiben aber langfristig attraktiv und angesichts der überaus lockeren Geldpolitik eine wichtige Inflationsversicherung für jedes Depot aus Aktien und Anleihen."
e-fundresearch: "Please comment on the performance and risk parameters of your fund in the current year as well as over the past 3 and 5 years."
Dhananjay Phadnis, fund manager "Fidelity Funds - Indonesia A USD" (15.12.2010): "I have been managing the Fund since 1 April 2008. Over my management tenure, the Fund has exhibited a lower volatility and better risk-adjusted return than the benchmark. Over my management tenure, the Fund (+60.7%) has significantly outperformed its benchmark (44.2%). Solid stock selection within the Financials sector proved rewarding.Year-to-date, the FF Indonesia Fund has generated a positive return of 39.1%, but has slightly underperformed its benchmark (+42.1%). Positive stock selection within the Health Care, Materials and Financials sectors helped relative returns, but exposure to Consumer Discretionary and Consumer Staple sectors detracted performance."
Magdalene Miller, Manager "Standard Life Investments China Equities SICAV Fund" (16.12.2010): "The Standard Life Investments China SICAV Fund has returned 16.1% over the last 12 months ending this November compared to an index return of 6.1%. The tracking error is 3.1, giving an information ratio of 3.0. Over the past 3 years, the return was -3.1% compared to an index return of -19.3% and for 5 years, the fund returned 290% compared to an index return of 157%. The tracking error was 5.3 over 3 years and 6.2 over 5 years, producing an information ratio of 1.2 and 1.4 respectively. We achieved top quartile performance in our peer group over 1,3 and 5 years. Standard Life China Sicav Fund has been generating excellent, consistent returns with good use of risk. All numbers are in US$, which is the base currency of the fund."
Peter Meier, Fondsmanager des "Quantex Strategic Precious Metal (CHF)" (01.12.2010): "Der Quantex Strategic Precious Metal Fund hat in den letzten 3 und 5 Jahren praktisch alle anderen Fonds im Goldsektor outperformt. Die Hauptgründe dafür waren: Die strategische Kombination von physischem Gold und Goldminen-Aktien, die Absicherung der Währungsrisiken zum Schweizer Franken, gutes Stock Picking mit Augenmerk auf kleine und mittelgrosse Goldminen mit Wachstumspotenzial und moderater Bewertung sowie die Ausklammerung gewisser politischer Hochrisiko-Länder wie Südafrika."
Johanna Keller, fund manager "LO Funds - World Gold Expertise (USD) P A" (08.12.2010): "As of end of November 2010 the LO Fund World Gold Expertise (USD) P A has been able to outperform its benchmark over all those time periods, with a volatility over 5 years which is similar to the one of the benchmark as we are well diversified among 90 to 120 names. The bias on the small and mid caps that we have decided to implement in the fund has been an important contributor to performance. The supply issues the gold sector faces will favour companies that are able to grow their reserves and therefore should continue to offer attractive returns."
Douglas Orsmond, Co-Fundmanager "Craton Capital Precious Metal Fund A" (16.12.2010): "The pleasing performance is based mainly on successful stock picking and is a function of expected catalysts been achieved. The portfolio construction is based on stock selection and does not focus on volatility reduction. The fund´s volatility is dependent on performance and the risk appetite/aversion of investors both towards the broad equity market and particularly towards gold equities. Compared with other gold funds and relative to the sector, the fund is normally amongst the lowest in volatility."
e-fundresearch: "What is your general market outlook for the next 12 months? Where do you see opportunities and where do you see risks?"
Dhananjay Phadnis, fund manager "Fidelity Funds - Indonesia A USD" (15.12.2010): "I am positive on the medium to long-term outlook for Indonesia, as underlying fundamentals remain robust and outlook for growth is strong. A rising middle class, urbanization, stable political situation, buoyancy in commodity prices and the very favorable demographics offer a strong visibility of growth. Yet, I believe short-term market volatility could rise since: 1) Market has done well on the back of strong inflows and may give up some of those gains and 2) Inflation which has been benign so far could rise on the back of higher food prices.Inflation in Indonesia is still under control at present as currency appreciation has helped offset some of the imported inflation. However, I remain cautious on the country’s inflation outlook given the rise in food prices. Food is a significant portion of the consumption basket in Indonesia and hence rise in food prices can lead to a rise in inflation. The impact should be mitigated to some extent due to any further appreciation of the Rupiah."
Magdalene Miller, Manager "Standard Life Investments China Equities SICAV Fund" (16.12.2010): "Standard Life Investments is positive on China over the coming 12-18 months as valuation is supportive and growth momentum remains strong. In particular, we are seeing improvement in corporate profitability and cashflow generation with new products/markets beyond what is priced in. With the tremendous credit growth last year, there is risk of misallocation of capital, so some sectors with overcapacity problems should be avoided. However, we see ample opportunities for profitable growth, consumption areas are still fertile ground for stock hunting but one has to differentiate cyclical from secular growth as well as be very wary of the level of competition. Within the consumer sector, there are healthcare, internet and travel companies with strong defensible franchises."
Peter Meier, Fondsmanager des "Quantex Strategic Precious Metal (CHF)" (01.12.2010): "Der Markt erscheint kurzfristig eher etwas überhitzt, da Gold seit einiger Zeit im Zentrum des Anlegerinteresses steht. Eine Korrektur in den nächsten 12 Monaten ist deshalb wahrscheinlich. Der weitere Verlauf wird durch die Geldpolitik der Notenbanken bestimmt. Wird weiter Geld gedruckt, etwa um überschuldete EU-Staaten zu retten, so kann der Goldpreis noch gewaltig steigen."
Johanna Keller, fund manager "LO Funds - World Gold Expertise (USD) P A" (08.12.2010): "For gold we continue to have a positive outlook as the investment demand might remain sustained due to the current macro environment and the continued fears we have outlined in the previous question. Accordingly, investors should continue to find gold attractive due to its store of value characteristics. Furthermore it is a mean of diversification in a portfolio and this might also be appealing for investors which might question the attractiveness of the other asset classes in this uncertain environment. Another support for the gold price is the change in Central banks attitude we have witnessed: until last year, European Central Banks were selling parts of their gold reserves, but have now almost stopped this practice. At present, the main seller in the market is the IMF which had planned to sell 403 tonnes of gold, of which 351 tonnes have already been sold. On the other hand Emerging Central Banks are buying gold to diversify their reserves. This means that a source of supply is disappearing and seems to have become a source of demand. Also, as customers get used to higher gold prices, jewellery demand in some of the key markets like India and China is recovering. Finally, industrial demand is also improving.
Therefore we continue to think that there are several supportive factors for gold. However, there will be some volatility in the markets, notably due to the speculative flows and US Dollar movements.
One should also notice that compared to gold, gold related equities have attractive valuations and don’t seem to reflect completely the current gold price!
An important part of the demand for other precious metals like silver or platinum comes from industrial applications, such as the automotive industry with its demand for platinum and palladium. As such they are much more linked to economic growth than gold. Furthermore the supply picture from one metal to another varies: the offer for platinum which relies for an important part on South African production might be constrained by power issues and labour cost pressure; In contrast to platinum, silver supply is much more abundant, also because silver often produced as a by-product of other metals."
Douglas Orsmond, Co-Fundmanager "Craton Capital Precious Metal Fund A" (16.12.2010): "We remain optimistic on the outlook for general markets in the next 12 months.
Continued signs of economic recovery as well as Quantitative easing and cheap money should keep markets well supported.
We continue to believe in spite of benign outlook for markets, that gold (and other precious metals) will also remain strong due to quantitative easing, high government debt levels and strong investor demand."
All data as per 06.12.2010 in Euro:
