HomeFinancePACIFIC NORTH OF SOUTH Lean, mean and hungry for a bargain

PACIFIC NORTH OF SOUTH Lean, mean and hungry for a bargain


London-based North of South Capital is a boutique investment manager which specialises in global emerging markets. It goes under the radar of most investors because it’s lean and mean (just seven employees) and doesn’t have the marketing clout of bigger rivals. But it knows its emerging markets inside out and has an investment strategy that seems to work. 

The business, 49 per cent owned by American investment house Pacific Asset Management, has more than £700million of assets under its wing. But its flagship is £455million fund Pacific North of South Emerging Markets All Cap Equity. 

The fund embodies everything that the business stands for. It’s well diversified – across both stocks and to a lesser extent markets. Also, the companies it likes to invest in are typically under-valued by the market – but have the potential to be rerated in the future on the back of strong earnings growth. The fund currently has 87 holdings even though its two biggest positions – in South Korean Samsung Electronics and Chinese internet giant Alibaba – account between them for more than ten per cent of assets. 

Kamil Dimmich, investment manager and a partner of North of South Capital, says the company sometimes gets criticised for running such a broadly based fund. But he says they are not for changing. ‘The diversified portfolio strategy works,’ he adds. ‘It’s a great risk management tool. If a one per cent position goes awry, it means the fund is not derailed. It’s not for everyone, but it helps us to sleep at night as managers.’ 

The performance numbers are solid. Over the past one and three years, the fund has generated overall returns of 24 per cent and 40 per cent respectively. 

Although value investing – buying stocks that are undervalued in the hope of them being rerated – is currently out of favour as a result of the market’s fixation with high-growth businesses, Dimmich says it delivers results for North of South Capital, so there is no reason to change. 

‘Until recently, we were investors in Taiwan Semiconductor Manufacturing Company,’ he says. ‘It’s a well managed business, two to three years ahead of rivals in terms of technology, and makes good margins on its products. But we sold out early this year because we felt the shares had become a little too expensive.’ 

Similarly, a stake in automobile dealership China MeiDong Auto was sold because its shares were rerated. Recent acquisitions include stakes in Alibaba and Taiwanese bicycle chain manufacturer KMC. Dimmich says: ‘Alibaba’s shares represented good value after they were buffeted last year by the decision of the Chinese regulator to suspend indefinitely the stock market listing of fintech business Ant which the internet company had a big stake in.’ 

He adds: ‘KMC, which we bought into over the summer, has built a niche business and has 85 per cent of the bicycle chain market. But it’s constantly looking for new opportunities. As a result, it’s now big into electric bikes, which require a different chain to a conventional bicycle. It’s also making inroads into the racing bike market. Despite its success and it being a great story, KMC’s shares are modestly valued and also provide a dividend yield of around five per cent.’ 

While Dimmich is concerned about the impact of inflation on the global economy and ‘stretched’ valuations on Wall Street, he is comforted by the fact that the fund’s holdings are more modestly valued. The fund’s stock market identification code is BD9GKZ4 and the code is PFNIA. The fund’s total annual charges are 0.96 per cent.


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