Presenting the reasons behind the figures
Allianz Global Investors touts gains of bringing GrassrootsSM into research division
Financial analysis in its richest form draws on a mosaic of information to create a valuable financial message. While the seasoned financial analyst embodies many of the great skills required to find rewarding investment opportunities, the financial journalist, as a secondary source of information, can be critical in achieving a greater depth of knowledge.
Allianz Global Investors (“AllianzGI”), backed by its proprietary research unit GrassrootsSM, produces research at this level. With over 350 information-gathering researchers around the world contributing to their information flows, the knowledge obtained from these researchers has proven critical to their business dynamic for nearly 30 years.
“This information is high quality and our clients consider it a very important product,” says Terence Law, Director, Head of Research Asia Pacific.
He goes on to outline the core themes of the division: “The word ‘grassroots’ literally means ‘fundamental’ or ‘of the people’. Backed by this namesake, we research prominent companies and markets and contribute to investment team’s portfolio construction for AllianzGI’s clients. The entity GrassrootsSM is an integral part of our global research process, bringing first-hand, insightful information that supports our business. For example, when we spot a company that has an attractive business model, good earnings growth potential and solid management, but we aren’t too familiar with the market or industry in which it operates, we will ask GrassrootsSM Research team to do a study for us.
The results of these studies will increase the conviction level of the fundamental research carried out by our analysts, or serve to challenge their investment case. In practice, GrassrootsSM has a presence in our investment meetings almost every day.”
First introduced in the US in 1984, GrassrootsSM Research has since built a wide footprint across Asia, Europe and the US. In addition to 11 in-house staff working for GrassrootsSM, the research platform comprises of over 350 researchers working on a project-by-project basis. Since its inception, GrassrootsSM Research has conducted over 250,000 interviews, covering hundreds of wide-ranging subjects globally. On average, there are 30 GrassrootsSM studies conducted each month.
Joey Wong, GrassrootsSM Research Associate, explained the level of professionalism achieved by the reporters in their contributions: “After we are requested by the investment team to conduct an investigation, we tailor questions for our reporters to take into the field. As part of this process, we work closely with our reporters to ensure they achieve our high standards and work to our stringent guidelines.”
Although GrassrootsSM reporters aren’t employed on a full-time basis by AllianzGI, the quality and integrity of the information received is under constant review. One of the unique features of GrassrootsSM is that many of the reporters have worked with the investment team for a long time (often over 10 years) and have built up a strong rapport with the unit. Moreover, AllianzGI has an internal compliance process in place that prevents the team from being exposed to any material non-public information.
Ms. Wong fleshes out the GrassrootsSM concept using an example of a previous case in Indonesia, where a department store chain was being investigated as a possible investment target. At the time, household consumption there was rising sharply, which painted a rosy financial picture for many consumer stocks. “Our portfolio managers met with the company management, and from what they told us it seemed like a good opportunity,” she said. “While the company admitted that there was a tough competitive environment, especially in Jakarta, they said they had expanded their business outside of Jakarta, which should benefit its long-term growth prospects. We wanted to confirm this really was an interesting story, so we launched a GrassrootsSM study. The findings were surprising.
“Firstly, they confirmed that the strong consumption trend was in place. However, when we asked questions on that particular company, the angle from our interviewees was very different from that of the management. People told the reporters that they were shopping less frequently at the department store, versus other places, because it was associated with low level brands and low quality. Consumers shopping in department stores were increasingly looking to purchase higher quality products. Meanwhile, when they were shopping for general merchandise, they were going to large-scale hypermarkets,” she said.
Importantly, the approach taken by the reporters tends to bring in different types of information to that of the analysts. For instance, while both may be asked to assess the future sales figures for a specific company, the reporter will seek non-traditional routes to discovering qualitative information, rather than using the core financial analysis techniques applied by the analysts. The critical information here is not the figures but reasons behind them. These sources of information are especially important when more traditional types of information regarding an investment are not available, such as when a company declines to issues significant amounts of financial information.
For more information, please contact:
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Allianz Global Investors Hong Kong Limited
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The views and opinions expressed in this document, which are subject to change without notice, are those of RCM Asia Pacific Limited and/ or its affiliated companies at the time of publication. Some of the information contained herein including any expression of opinion or forecast has been obtained from or is based on sources believed by us to be reliable, but is not guaranteed and we do not warrant nor do we accept liability as to adequacy, accuracy, reliability or completeness of such information obtained from or based on external sources. The information contained herein including any expression of opinion is for information purposes only without consideration given to specific investment objectives, financial situation or particular needs of any person and is given on the understanding that it is not a recommendation nor investment advice and any person who acts upon it or otherwise changes his or her position in reliance thereon does so entirely at his or her own risk without liability on our part. This is not a recommendation or offer to buy or sell or a solicitation or incitement of offer to buy or sell any particular security, strategy, investment product or services.
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