ASKED what kept them together as col-

leagues since 1999, Nikko AM’s head of

Asian equity Peter Sartori and senior portfo-

lio manager Tan Eng Teck looked at each

other and laughed. “I think there’s trust and

respect,” says Mr Sartori. “Because of that,

we’ve stuck together through tough times

like the global financial crisis.”

Mr Tan, who runs Nikko AM’s regional portfolios together with

Mr Sartori, say they complement each other in the way they look at

stocks and countries. Mr Tan is drawn towards value stocks, for ex-

ample, while Mr Sartori is drawn towards growth stocks.

“I’m an accounting graduate and love forensic accounting, I

tend to be stronger when it comes to financials. Peter was a portfo-

liomanager from day one, and tends to be stronger when looking at

whether business models make sense in the longer term,” he says.

“We’ve seen how each other reacts to different environments,

so we can balance each other out and question each other’s as-

sumptions.”

Mr Sartori and Mr Tan first started working together at Austral-

ian fund house Colonial First State Investments. They then moved

to Credit Suisse Asset Management in Australia, before Mr Sartori

started Asian boutique asset manager Treasury Asia Asset Man-

agement (TAAM) in 2005 with Mr Tan as one of the founding mem-

bers. Nikko AM Asia, part of Japan’s Nikko Asset Management

Group, acquired DBS Asset Management in 2011 and TAAM in

2013.

Today, the team in Singapore is 21-strong: Eight analysts, eight

portfolio managers, one macro specialist and four dealers. Many

members of the team have worked with each other for 10 years,

and each portfolio manager has around 20 years of experience on

average.

A disciplined, multicultural team“Our team is very experienced, very multicultural,” says Mr Tan.

“We invest in 10 different markets so it puts us in a strong position if

members of the team speak the language and know the cultural dif-

ferences.”

Mr Sartori says that having different nationalities in the team -

Australian, Singaporean, Chinese, Indian, Malaysian and Ameri-

can - helps investment decisions. “We try to be open-minded.

Sometimes if everybody comes from the same culture, nationality

or country, you can get consensus decision-making.”

Nikko AM has a disciplined investment process, Mr Sartori

says. Analysts, who cover stocks by sectors, do very thorough fun-

damental research on them, including poring through financial state-

ments, industry reports, and questioning management while build-

ing a valuation model.

They then put a ranking on selected stocks, and debate and dis-

cuss them at weekly research meetings. As many as 200 stocks

can come through the selection process beforeMr Tan and Mr Sar-

tori decide on the best to buy.

Controls are also in place to eliminate individualism where port-

folio managers are concerned, Mr Tan says. “If an analyst has a

‘sell’ on a stock, the portfolio manager cannot buy it no matter how

much he likes it. When constructing portfolios, if a stock is ranked

lower by analysts, portfolio managers also reduce the active posi-

tion.”

Dealing with volatilityMr Sartori says investors are facing a difficult moment in 2016 as

Asia is out of favour, while the biggest market in the region, China,

is undergoing a major transition.

"But this also throws up huge opportunities. Using history as a

guide, when there are a lot of negative views, when sentiment is

poor and valuations low, it’s generally a good time to get exposure,

taking a long-term view.”

Given how many sectors are very cheap, the team is also dis-

cussing every day whether stocks are value traps. This refers to

companies which are doomed to fail and are cheap for a reason.

While he would avoid commodity stocks, Mr Sartori sees Chi-

nese health care as an opportunity given how they trade at a 50 per

cent discount compared to their peers in India and Thailand.

Mr Tan says the pool of patients for Chinese healthcare compa-

nies is among the fastest-growing in the world, and the government

is also committed to spending more. He is also buying Chinese In-

ternet stocks. "Everyone talks about slowing growth in China but

many Internet companies are still growing at 20-30 per cent a year,”

he says.

Amid the volatility, Nikko AM is taking a longer-term view and

sticking to its investment process. Says Mr Sartori: “I say, forget

what’s going on this quarter, let’s stick to a three to five-year time

horizon, get out, do good research and find some stocks.”

Across Asia, the fund house favours India, which is still growing

well. It owns banks, health care and infrastructure stocks there.

Mr Tan says he is avoiding Malaysian stocks as the oil exporter will

face economic problems with lower oil prices. Stock valuations

there are also relatively more expensive there as domestic pension

funds invest more within the country than without, he says.

A successful combinationAsia, on the whole, is improving as corporate governance takes

root and countries transform themselves through reforms, Mr Tan

says.

“China’s path now is not that much different from the path taken

by Singapore, Japan, Taiwan and Korea - just that it’s on a much

bigger scale. Looking ahead, the Chinese will spend less of their in-

come on food and more on services. They want to do more things,

travel, own a bigger house, bigger car. We look for what is emerg-

ing.”

NikkoAM’s investmentprocess is winning the confidenceof ma-

jor investors globally. The house recently won sizeable mandates

from European institutional clients, Mr Sartori says. This shows

how institutional clients and consultants have seen how the house

has integrated its TAAM acquisition well, he said.

“The existing Nikko AM business was already relatively strong

on Singapore equities and in the last two years, it has grown strong-

er. Our Asian regional portfolios were very small. That’s where

TAAM was strong. The integration is working well.”

Ultimately, the best way Nikko AM can add value for clients is to

buy into good companies early and own them for the long term, as

opposed to pursuing short-term and trading-oriented strategies, he

says.

“We think there’re some really fantastic, young Asian compa-

nies we have in our portfolio that we will own for the next decade.

They are mostly mid-capitalisation companies which can become

very large companies.”

And in challenging times like these, good teams will emerge,

Mr Sartori says. “The foundations are in place for Nikko AM to deliv-

er performance for clients. Our parent company is committed to

Asian equities, and committed to our office.”

Nikko AM's Peter Sartori and Tan Eng Teck have been working together for 17 years

Sticking together through good and badSPECIAL FEATURE

‘Using history as a guide, when there are a lot of negative views, whensentiment is poor and valuations low, it’s generally a good time to getexposure, taking a long-term view.’

– Nikko AM’s head of Asian equity Peter Sartori

10 | The Business Times | Wednesday, March 2, 2016