Esemplia regroups with new hires, targets HK

Esemplia Emerging Markets, the dedicated global emerging market (GEM) equity affiliate of Legg Mason, has made two new hires on the investment side, with more to come early this year.

Both hires are in the firm’s London headquarters, while some of the additional appointments will be in Hong Kong. Aquico Wen, the former CIO of Esemplia, is leaving the firm in the first half of 2013.

Steve Triantafilidis has joined from Vontobel Asset Management as a principal and head of investments. He was previously at Vontobel Asset Management in Zurich, where he was a managing director and head of global equities.

He has also worked for a number of other institutions including Swiss Re and Daiwa Securities over 28 years, across research, portfolio management and asset allocation. He has worked across long-only and long-short portfolios in a number of asset classes with a focus on fundamental global equity investing.

Meanwhile, Michael Bourke has been appointed portfolio manager of the firm’s long-only GEM strategies and will focus on implementing analysts’ ideas into those portfolios.

Bourke joins from FPP Asset Management -- a London-based boutique EM firm -- where he was both a partner and a portfolio manager in its global emerging markets equity team. He has spent a number of years with Deutsche Bank and Bankers Trust. 

It is understood that a further three hires have been agreed and confirmed to start in the first quarter of this year, but are yet to be made public.

The firm is also seeking a portfolio manager to work in its Hong Kong office and will be launching an Asia ex-Japan long-only strategy, as well as long/short, over the course of this year.

As at the end of December 2012, Esemplia had $2.5 billion under management in a series of emerging market strategies. The core long-only GEM strategy has $1.47 billion in AUM; a Hong Kong and China long-only strategy has $1 billion; and a GEM long/short strategy has $30 million.

The core fund had a difficult 2012, returning 16%, underperforming the benchmark by two percentage points. However, this gap has closed and in December it marginally outperformed the benchmark, returning 4.9% to investors.

According to Jim Kandunias, the managing principal and CEO of Esemplia, the firm undertook a strategic review last summer and started implementing personnel changes during the autumn, with the affect now starting to come through.

“This is the next step in the evolution of the firm, although our DNA is staying exactly the same,” he says. “We remain an active investor and we believe in valuation, but we are now improving the application and implementation of that philosophy.”

The changes will see portfolio managers focus solely on long-only or long/short strategies, thus removing some of the conflicts inherent when an individual seeks to run both.

“It is key for us that we recognise long/short is more specialist and needs to be managed separately from long-only,” says Triantafilidis. “This lets the manager keep their focus and avoids confusion in how convictions are expressed.”

The new hires are also looking to capture changes in GEMs more broadly. With emerging market companies such as Tata Motors or Samsung Electronics now operating heavily in developed markets, it is important to be able to look at them through a developed market lens.

“By adding resources with developed market experience, we can look at emerging market companies in comparison with their developed market counterparts,” says Triantafilidis. “Our regrouping reflects the fact that emerging market companies are becoming more global [and increasingly so].”

The new hires and the overall regrouping of the firm have the support of parent Legg Mason. Over the past year, their US distribution team has helped Esemplia launch a US-listed version of the core GEM long/short fund.

“Legg Mason is committed to the affiliate model, committed to Asia and committed to the international equity space,” says Kandunias. "We have institutional scale, infrastructure, governance and control by virtue of being a Legg Mason affiliate.

"Our board includes a number of senior executives from Legg Mason all of whom have experience in turning around asset management firms. They have provided us with tremendous insight during the process.”

GEM is one asset class in which active management plays a differentiating role. The dispersion is very wide between the best and worst performers.

Even with a surge in ETF interest over the past 18 months, a number of studies show that active management within GEMs adds value over a market cycle, given market inefficiencies.

However, new flows into GEM funds tend to go to the best performers, in a winner-takes-all situation. As the bigger emerging markets of China and Brazil start to improve, so performance figures will be watched closely.

“We have seen some switching from defensive to more cyclical and risky weightings in recent months as confidence comes back into the markets,” says Triantafilidis. In theory, this rebalancing should help the performance of value investors such as Esemplia.