We are strong advocates of the fundamental attractions of a Pan-Asian mandate, and believe its relevance now is greater than ever. Below we highlight factors that we believe support this view:

• The development of the Asian economies and stagnation of Japan have narrowed the big gap in spending power that previously prevailed.
  
• The emergence of China as the driver of the region's growth has brought the two further together; we have seen highly correlated moves in shipping, steel and commodity stocks across the region, all of which are China plays.
  
• At a company level, investors in Japan have to pay attention to Asia because of the increase in competition and growth in demand. Both are long-term themes. Outside the technology sector the reverse is less true, as Asian companies have benefited from strong domestic demand.
  
• When playing pan-Asian themes in materials and resources for example, it makes sense to include the Australian miners. In risk terms, the other merit is that, as a mature market, correlations with emerging Asian markets are low, giving us an alternative place to invest during turbulent times.

The strongest arguments in favour of the mandate come at the stock level and in portfolio construction. The key issue here is the ability of managers to cherry-pick the best ideas from across the Asian region. This plays into what we consider our main strength, our ability to pick stocks. This comes through in a number of ways: 

• We can allocate assets effectively to the best long-term stories. Thus we might continue to emphasise the Japanese car-makers as being the best in the region, but avoid Japanese consumer electronics stocks which have far less credible business models and are much more exposed to emerging Asian competition.
  
• We are able to run de facto pairs trades, such as long Samsung/no Sony.
  
• We are not forced to own stocks by running close-to-index positions in large-cap stocks - if we don't like Japanese banks we don't have to own any, especially if there is much more robust credit creation in Malaysia or Thailand.
  
• And we are able to avoid conflicting positions, something that may well happen if investors are sourcing their Asian exposure from a number of different funds.