2015 Q2 FUND MANAGER’S REPORT
OLD MUTUAL ASIAN EQUITY
FUND
JOSHUA CRABB
FUND MANAGER
INVESTMENT OBJECTIVE
The objective of the Old Mutual Asian Equity Fund is to seek to achieve asset growth
through investment in a well-diversified portfolio of securities of Asian issuers or of issuers
established outside the Asian region which have a predominant proportion of their assets
or business operations in the Asian region. It is not proposed to concentrate investments in
any one industry or sector.
TOTAL NET ASSETS (MILLIONS):
FUND DOMICILE:
Ireland
BASE CURRENCY:
USD
BENCHMARK:
$239.2
MSCI AC Asia Pacific Ex Japan TR USD
MORNINGSTAR SECTOR:
EAA OE Asia-Pacific ex-Japan Equity
CUMULATIVE PERFORMANCE
1 month
3 month
6 month
1Y
3Y
5Y
Since Inception
Fund
-5.0
0.5
2.3
3.5
13.5
-
-7.7
Benchmark
-3.9
-1.0
3.4
3.0
28.9
-
14.2
DISCRETE PERIOD PERFORMANCE
2015 YTD
2014
2013
2012
2011
2010
Fund
2.3
3.7
-5.9
14.1
-
-
Since Inception
-7.7
Benchmark
3.4
5.1
1.7
22.6
-
-
14.2
Past performance is not a guide to future performance. Source: Factset. © Morningstar. All Rights Reserved. The performance shown is at fund level (Class A USD ACC shares)
and does not include a sales charge. Had a sales charge been included returns would have been lower. Figures shown assume reinvestment of all dividends and capital gains
unless otherwise noted. All information as at 30/06/2015 unless otherwise stated. Performance prior to 15/10/2014 is attributable to a previous sub-adviser
PERFORMANCE SUMMARY
POSITIVE PERFORMANCE FACTORS

Underweight position in Australia, especially banks and ASEAN

China banks, Ping An, technology hardware and West China Cement

Korean chemical company Lotte Chemical
NEGATIVE PERFORMANCE FACTORS

Underweight Hong Kong, particularly HK Exchange

Sun TV in India

Energy underweight / stock selection
RATINGS AND AWARDS
Citywire Fund Manager Ratings rate fund managers for their 3 year risk adjusted performance for a 36 month period.
Quarterly report
MARKET REVIEW
VOLATILITY PRESENTS OPPORTUNITY AS
LONG AS YOU CAN AVOID THE
PITFALLS OF BEING CAUGHT UP IN
BEHAVIOURAL MISTAKES
OLD MUTUAL ASIAN EQUITY FUND
GREECE, FED AND CHINA STOKE VOLATILITY
The MSCI Asia Pacific Ex Japan Index closed down about 3% over the quarter. However
over the same period it dropped 4%, rallied 12% then fell 10%. This pickup in volatility was
to be expected given the backdrop: Greece, Fed rate increases and China policy around A
share market moves. This may moderate over the near term given the recent spike, but we
expect the low volatility environment we have seen over recent years will not return. That
said we think volatility presents opportunity as long as you can avoid the pitfalls of being
caught up in behavioural mistakes and being whipsawed by following the market.
Over the period China was the stand out market. A shares continued their strong run and
since the bottom of the market toward the end of 2013, with a forward PE ratio of 7.4x the
market was trading at almost 21x by the end of June 2015 a little above the 18x of the S&P.
Although the A share market at this point does not offer value, the H share market (HSCEI),
however at 10x forward PE is still compelling.
From a sector perspective, diversified financials, which was predominantly around the huge
move in Hong Kong Exchange and Insurance (driven by Chinese insurers), performed well.
From a negative perspective, Australian banks, regional autos and Korean technology
performed poorly.
PERFORMANCE REVIEW
FUND OUTPERFORMS BENCHMARK
OVER THE QUARTER
AUSTRALIA BANKS STANCE SUPPORTS
RETURNS
The fund outperformed the benchmark over the quarter. Positive contributors to
performance were:
Underweight Australian banks on valuation concerns post strong runs
Overweight in Chinese banks on cheap valuations, yields and reform
Lotte chemical cyclical lift in profits on supply and demand imbalance
West china cement on cheap valuation and one road one belt stimulus
Ping An on cheap valuation and growing new business from middle class
Kolao on exposure to frontier market auto demand
Negative contributors to performance were:
Sun TV which was hurt on concerns of political interference
Underweight to Hong Kong, predominantly driven by the very strong performance of HK
exchange
Our underweight and stock selection in Energy given bounce in oil prices
Overweight in Samsung given perceived weakness in smartphone shipments
Quarterly report
FUND ACTIVITY REVIEW
STILL SEE VALUE IN H SHARE MARKET
OLD MUTUAL ASIAN EQUITY FUND
TAKING SOME PROFITS IN CHINA
From a country perspective, over the course of the quarter we reduced some of our strong
performing names in China. Although we still see value in the H share market with forward
PE of still only 10x, as opposed to the fully valued A share market at 21x, several of the
stocks have moved to much too fast and we anticipate better re-entry points. In addition the
surging A share market has resulted in a slower implementation of easing measures that are
necessary to stimulate the real economy than we believe would otherwise have happened.
On the other side of this we have increased our position in India. The Indian market had a
very strong run post the Modi win. As with political events implementation takes longer than
expected and as people questioned this combined with concerns of a weaker monsoon
impact the large rural economy, India under-performed China significantly. We used this
opportunity to add to names with good valuation support that stand to benefit the most from
the changes that Modi will effect in India. These are not, however, the expensive names that
have performed well over the last several years. Modi is a change and will change what
performs well, looking forward.
FUND POSITIONING AND
MANAGER’S OUTLOOK
VOLATILITY LIKELY TO REMAIN ELEVATED
There was significant amount of market and cross sectional volatility over the quarter,
VOLATILITY IS CREATING LOTS OF
INTERESTING IDEAS AT GOOD
something that may calm down in the very near term given the Greece aid extension, the
Fed statement is done for another month and an A share correction has occurred. However,
VALUATION LEVELS
volatility is likely to stay more elevated than markets have become used to over the last few
years. This is more normal and creates more opportunities, but does raise the risk of trend
following investors being whipsawed. Make sure you are making the right decisions for the
right reasons as things may change more rapidly than we are used to.
Asian markets have returned to cheap valuations with the MSCI Asia Pacific now back below
1.5x PB and 13x earnings. These have acted as good support levels over the last few years.
When we consider that the future is uncertain, despite what many try and predict, and
valuation tells us what the market is expecting, we are now expecting bad outcomes which
can result in positive surprise. It is important to look forward not backward. As a result we
are optimistic and think the volatility is throwing up lots of interesting ideas at good valuation
levels and we are taking the opportunity to buy them.
Quarterly report
OLD MUTUAL ASIAN EQUITY FUND
ONLINE
Download fund data and read investment
updates from this fund manager at
www.omglobalinvestors.com
CLIENT SERVICES
+353-16224499
Old Mutual Global Investors
(UK) Ltd
1 North Wall Quay, Dublin 1, Ireland
Building better solutions.
The value of an investment and the income from it can go down as well as up and investors may not get back the full amount invested. Past performance is not a guide to future
performance. The price of shares and the income generated may go down and up and may be affected by exchange rates. This communication has been prepared for general
information only. It does not purport to be all-inclusive or contain all of the information which a proposed investor may require in order to make a decision as to whether to invest
in the Fund. Nothing in this document constitutes a recommendation suitable or appropriate to a recipient’s individual circumstances or otherwise constitutes a personal
recommendation. We recommend that this document is read in conjunction with the latest factsheet, which provides additional information on the fund's main holdings, asset
breakdown, product details and investment manager. No investment decisions should be made without first reviewing the prospectus and the key investor information document
of the Fund which can be obtained from www.omglobalinvestors.com. This communication provides information relating to a fund known as Old Mutual Asian Equity Fund (the
“Fund”), which is a sub-fund of Old Mutual Global Investors Series plc. Old Mutual Global Investors Series plc is an investment company with variable capital established as an
umbrella fund with segregated liability between sub-funds which is authorised and regulated by the Central Bank of Ireland pursuant to the European Communities (Undertakings
for Collective Investment in Transferable Securities) Regulations 2011, as amended. Registered in Ireland under registration number 271517. Registered office: 33 Sir John
Rogerson’s Quay, Dublin 2, Ireland. This communication is issued by Old Mutual Global Investors (UK) Limited (trading name Old Mutual Global Investors), a member of the
Old Mutual Group. Old Mutual Global Investors is registered in England and Wales under number 02949554 and its registered office is 2 Lambeth Hill London EC4P 4WR. Old
Mutual Global Investors is authorised and regulated by the UK Financial Conduct Authority (“FCA”) with FCA register number 171847 and is owned by Old Mutual Plc, a public
limited company limited by shares, incorporated in England and Wales under registered number 3591 559. The prospectus and the KIID are available free of charge at: Austria:
Erste Bank der oesterreichischen Sparkassen AG, 1010 Wien, Petersplatz 7, Austria. Germany: Skandia Portfolio Management GmbH, Kaiserin-Augusta-Allee 108, 10553 Berlin,
Germany. France: BNP Paribas Securities Services, Les Grands Moulins de Pantin, 9 rue du Debarcadère 93500 Pantin, France. Hong Kong: Old Mutual Global Investors (Asia
Pacific) Limited, 24th Floor, Henley Building, 5 Queen's Road, Central Hong Kong. Luxembourg: BNP Paribas Securities Services, Luxembourg Branch, 33 rue de Gasperich, L5826, Grand Duchy of Luxembourg. Spain: Allfunds Bank, C/ La Estafeta 6, Edificio 3, 28109 Alcobendas, Madrid, Spain. Registered with the CNMV number 301, the 17
October 2002. Switzerland: Copies of the prospectus, the memorandum and articles of association, the key investor information documents as well as the annual and semiannual reports of the Fund may be obtained free of charge from the Swiss representative, First Independent Fund Services Ltd, Klausstrasse 33, 8008 Zurich, Switzerland. The
Fund is approved by the Swis s Financial Market Supervisory Authority. FINMA for distribution in and from Switzerland. The paying agent in Switzerland is BNP Paribas Securities
Services, Paris succursale de Zurich. Taiwan: Capital Gateway Securities Investment Consulting Enterprise, 9F/9F-1, No. 171, Songde Road, Xinyi District, Taipei City, Taiwan,
R.O.C. United Kingdom: Old Mutual Global Investors (UK) Limited, 2 Lambeth Hill, London, EC4P 4WR, United Kingdom. The Fund is recognised by the FCA. Other: Old
Mutual Global Investors Series plc, c/o Citibank Europe plc, 1 North Wall Quay, Dublin 1, Ireland.