RAM Active Investments' emerging market equity trio have piled into Taiwanese equities to capitalise on strong earnings growth potential and attractive valuations.
This is marked increase from the start of the year and also a rise from the 23.6% position held at the end of March.
‘On a year-to-date basis, we increased our Taiwanese holdings more than 8% and decreased our Chinese ones by the same amount. Chinese companies look less interesting to us at the moment, as well as South Korean ones,’ Hauptmann said.
China currently makes up 8.4% of the fund compared to a 17.9% allocation in the fund's index, the MSCI EM Emerging Markets.
The Taiwan exposure is largely through IT companies, notably in smartphones, PC and laptops, which Hautpmann said are showing high earnings momentum and a low level of capex.
In terms of sectors, IT represents second largest exposure at 18.6% of the portfolio, against the 16.7% of the benchmark. Elsewhere in the fund, Hauptmann and his colleagues recently increased exposure to healthcare and telecommunication, which make up 4.6% and 8.1% of the portfolio, respectively.
Hauptmann also touched upon the EM equity fund's positioning in Russia. Among the top 15 holdings are four Russian companies: three energy firms (Rosneft, Gazprom and Surgutneftegaz), as well as telecommunications group Mobile Telesystem.
‘We held our 4% overweight in Russia as we think the Ukraine’s crisis didn’t impact the valuation levels of the stocks. They still look attractive to us,’ Hauptmann said.
Another significant geographic play in the fund is Australia, Hauptmann said, which is currently a 10% off-benchmark bet. He said this is being used to 'decrease the EM risk'.
‘It isn’t the time to be underweight emerging markets,’ he says. ‘Central banks’ negative announcements have already been priced-in, and developing countries still look attractive in comparison to Europe and the US from a valuation point of view.’
Hauptmann also said the RAM EM Equities fund, which currently sits at just under $2 billion in assets still has room to grow and has a soft close limit of $3 billion.
The RAM (Lux) SF-Emerging Markets Equities fund has returned 14.3% over the three years to the end of March 2014. This compares to a fall of 7.42% by its Citywire benchmark, the MSCI EM (Emerging Markets) TR USD, over the same period.