Minerva’s China and ASEAN strategy launch

Minerva’s China and ASEAN strategy launch

Minerva Asset Advisors | SEBI Registered Investment Adviser: INA000020332

After 15+ years of advising on a solitary India-focused strategy, Minerva Asset Advisors has now done a ‘closed launch’ on our Emerging Asia strategy through an offshore SMA structure. In line with Minerva India Under-served (MIUS), our EM Asia strategy (MEA) intends to largely focus on institutionally under-owned publicly traded assets within China and ASEAN. Over last 18+ months, we scouted for what we believe are clean and durable fiduciaries at compelling prices.

Why bother?. When stacked against ASEAN peers, it is hard to argue against India’s relatively better shareholder empowerment and superior market breadth. When coupled with well entrenched inefficiencies (lower income levels, heavily protected industries, poor education infrastructure etc.), India gets squarely placed within a unique cohort that can (at least theoretically) deliver unparalleled growth runways as long as it continues to chip away at addressing these structural inefficiencies. Essentially, the arguably ‘cocooned’ growth that India delivers, the associated breadth of investment options, protection for minority investors, and underlying liquidity combine to provide investment alternatives that aren’t easy to identify within emerging markets. That said, we note far superior cash return culture at Chinese businesses while realistic expectations get capitalized at reasonable multiples. Overall, we believe that emerging Asia remains arguably better positioned to 1. Foster businesses that can competitively transcend borders, 2. Create quality non-farm jobs on a more sustained basis, and deliver relatively compressed purchasing power distribution, 3. Allow businesses to trade relatively freely across borders, and 4. Preserve an environment that can operate with somewhat lower risk of ‘protracted’ litigations. That many publicly traded names are available in such markets at undemanding valuations makes this an unmistakably asymmetric whitespace. This opportunity comes at a time when retail speculation remains extremely elevated in markets such as United States. Meanwhile, since global offshore flows within most emerging markets aren’t necessarily driven by country-specific vehicles, bottom-up security selection in these markets remains significantly undercrowded. This is Minerva’s calling.

Exhibit 1 benchmarks MEA and MIUS against Nifty50 (ex-fin) and S&P 500 (ex-fin), while Exhibit 2 plots MEA’s holdings’ valuation against underlying operating returns.

Devchandra Ramani Kunal Kapoor Ojas Arora Sourav Dutta Amrit Raj

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