Global fund bets on S'pore and emerging markets

China may be facing slower growth and mounting debt problems but Mr Hendrik du Toit, chief executive of Investec Asset Management, is not about to bet against the economic powerhouse.

Mr du Toit is so bullish on the world's No. 2 economy that, like United States President-elect Donald Trump and his Chinese poetry-citing granddaughter, he has his own teenage son learning Chinese, he told The Sunday Times.

"I can't guess about China in the long term, I can't guess whether credit is going to be arrested... What I do know is that they have created a US$10 trillion economy from a US$1 trillion economy in the time we have existed as a firm. It's dangerous betting against the momentum in financial markets," he said. He added that the "US has been written off many times in my career... but ignore the big machines at your own peril".

The 26-year veteran of asset management should know. Mr du Toit, who hails from Johannesburg, has built Investec into a formidable global fund, with more than US$110 billion (S$157 billion) worth of assets under management as of June 30.

The company sets itself apart from other funds, as it has developed from emerging market roots, starting from Africa, and has long bet on the emerging markets.

AIRCRAFT CARRIER ROLE

We see Singapore as the aircraft carrier in Asia, because Singapore is a place to do business in the Asean and Asia-Pacific region.

'' MR HENDRIK DU TOIT, chief executive of Investec Asset Management.

"We've grown into the global premier league... and it was very clear we need to follow where the money is generated," he said.

The importance of emerging markets cannot be overstated, he added.

"More than half the money we invest for our clients is deployed in emerging markets, and we need to understand Asia well. A good way to do this is to be commercially active, and not just to invest in it,because you get contact points in government, private sector and individual advisers who provide you with a significant amount of intelligence and perspective."

While the company has had its office in Singapore to cater to institutional investors since 2012, it decided to get a retail licence here in March this year to cater to individual investors.

The company now has 19 funds available to retail investors, spanning Chinese equities to emerging markets corporate debt.

"We took a decision about three years ago to emphasise our retail business as we realised that our institutional business had grown very fast, but our retail business was not growing as fast, so we decided to put in a global effort to really drive this."

He said the decision to go into retail was a natural progression, as funds usually start by working with institutional clients to understand the region, before moving on to serving individual investors.

"We see Singapore as the aircraft carrier in Asia, because Singapore is a place to do business in the Asean and Asia-Pacific region."

He revealed that the company has interesting plans for Indonesia in the pipeline, and noted that "Singapore is a great base to start observing Indonesia from".

Mr du Toit said that Investec is focused on helping savers who want to generate income.

"One of the key messages I have - you cannot manufacture artificial income. Good dividends, income from solid bonds and good credit are good and sustainable, but there's a whole industry trying to manufacture income that doesn't really exist by transferring high capital risk into income."

The income-chasing tendency around the world is "going to end in tears", he warns, once interest rates are adjusted to normal levels.

He said that the company prefers to provide "conservative income vehicles" and reminds investors that they must "keep their capital because they will live longer than they think".

A version of this article appeared in the print edition of The Sunday Times on November 20, 2016, with the headline 'Global fund bets on S'pore and emerging markets'. Print Edition | Subscribe