Can you tell us how some of your specialist funds are faring?
We have a team here that manages resource-based equity funds, and it is an area to which we have had a long-term commitment.
Since we hired Duncan Goodwin from Martin Currie as the head of that team two years ago, he has made a tremendous impact in terms of bringing new energy and fresh ideas, and he has changed the way in which we run those funds.
Across that team, we have a suite of three funds: Global Resources, Global Agriculture and Global Mining. The resources fund has a fairly broad mandate, meaning it can invest in agriculture, metals and mining, but also chemicals and similar areas.
Ultimately, you have to remember that when clients buy an agriculture fund, typically they are buying a balanced portfolio because they believe that theme is going to provide them with additional return over and above world equities.
It has been quiet for a couple of years from an asset-gathering perspective, reflecting what has been happening in the world markets, but it is an area we believe remains very much intact in terms of the long-term investment case.
If you look at what Barings does as an investment house, we have a common philosophy as to how we go about running equity products, and that is built around quality GARP.
What we are fundamentally doing is stock research, and looking for opportunities where stock has been mispriced.
That process has been evolved over the past year since we hired Jean-Louis Scandella as head of equities. He has brought even greater focus to that philosophy, putting particular emphasis on quality. He also looks at the five-year earnings outlook for the companies we are researching.
Which products do you think are most likely to sell well?
Our products are skewed to markets where we have the ability to add value with that type of investment approach; in other words, markets that are arguably less efficient or less well covered by sell-side analysis.
Where that leads you to is emerging markets and to smaller mid-cap companies. This year to date, our most successful product in Europe is our European Small Mid Cap Fund, which has a tremendous performance record over many years.
The reason it is seeing particularly good inflows now is partly due to that but also significantly due to the fact that our clients, who are basically asset allocators, have moved out of US equities and into European equities during the course of this year.
Looking further ahead, as to where markets will go next, we are committed to a number of asset classes that have been less in favour with investors for a while now.
We strongly believe in the long-term investment case for those areas, and that will turn at some point. What we are doing is making sure that when it turns we are there, positioned with a quality product with demonstrable, long-term relative performance records.
