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April 1, 2009 3:00 am
Everyone knows Barings. The banking name dates back to the 1760s, but the main reason it is so widely recognised is not so much its longevity as its disappearance. Famously, Barings Bank was wiped out in 1995 after rogue trader Nick Leeson lost £827m - twice the company's trading capital - making uncovered bets on the Japanese stock market.
The only remnant of the brand is Baring Asset Management, which was acquired by MassMutual, the US life insurer, in 2005 after a decade within the ING Group - the company that bought the failed bank for a nominal £1.
Barings retains the bank's focus on the Far East. When the group turned bullish on equity markets last October - shortly after spectacular falls across the globe - its multi-asset team chose to focus on China rather than the traditional defensive sectors, such as large-cap US stocks.
So far, this has proved a profitable strategy: while banking problems have pushed the FTSE 100 sideways since the October lows, the Shanghai stock market has bounced 37 per cent.
Marino Valensise says this is partly luck, but he also has clear reasons for believing that "the decoupling argument is as strong as it has ever been". First, he predicts China will be the only economy in the world to grow substantially in 2009. Second, the country has much greater control over its banking sector than the developed world - a crucial extra tool in the fight against global recession.
Summing up the problems facing western central bankers, he says: "You can create as much money as you want but if the banks put it all into their black hole, that money does not find its way into working capital and [the] real economy."
In contrast to China, Mr Valensise sees the laissez-faire US as the ideal Marxist economy because wealth creation, at least in the financial and car sectors, has benefited the labour force rather than the capitalists.
"If you were a shareholder in Merrill Lynch over the past five years, you lost money. If you were an investment banker, you made millions," he points out.
Barings has a further, business-related reason to avoid the US: as one of the most liquid and efficient markets in the world, it offers little scope for differentiation. The house would not be able to charge the same premium rates it receives for running its $2.8bn Hong Kong China fund.
"Everyone does US equity - some of them probably better than us from a regional product point of view. It's not a market where we have anything special to offer," says Mr Valensise.
Instead, Barings focuses on stock picking in inefficient capital markets and asset allocation - both high-alpha, high-margin activities. It launched an agriculture fund in January, for example.
As with China, macroeconomics provided the underlying rationale, but the theme also received a last-minute "value" kick when the commodity boom came to an abrupt end.
"If you see prices going down 50 per cent, you buy. Every time you see a market correction you must buy," he urges investors.
Stephen Wilmot is a features writer at Investment Adviser
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