For over ten years, the Allianz Global Investors Taiwan Fund has been investing in smaller Taiwan-listed companies delivering consistent outperformance.

The fund has a tested and disciplined investment approach evolving to increase the integration of ESG into screening and engagement.  The starting point of portfolio construction is selecting an investable stock pool using quantitative screening indicators ( ROE, debt ratios, market cap, valuation, etc.) and qualitative fundamental research factors, including ESG, determined by individual analysts.   This stock pool is formally reviewed twice a year, where stocks can be added or temporarily removed.

Performance has beat the Taiwan OTC Index and also above its peers. However, the fund did suffer a significant maximum drawdown of between 30-35% in the past three years, although recovery was relatively quick.   We note rigorous liquidity monitoring – a smaller cap portfolio –  with the top 10 stocks referenced each week against their 20-day average trading volume.   

Overall governance and due diligence measures are robust, with the investment team interacting with investees and potential investees quarterly.  ESG factors are considered in the fund, and the team welcomes steps to increase ESG integration,  including resources and ESG expertise within Allianz Global Investment Group. However, the committee would like to see a more robust voting process as simply reviewing its shareholder meeting proposals before voting is not enough.  

The analysts conduct multi-party assessments to find new investment trends through on-site inspections of the investees, and they are also fully responsible for information disclosure.  Analyst turnover rate is somewhat high, and each analyst is also responsible for more than 90-109 stocks; therefore, the coverage seems stretched and potentially affecting research depth.   

This fund has been reviewed by three industry veterans of the Benchmark judging committee.