Desmond Kinch’s latest annual letter is now available (link here). We have covered his letters from previous years and find they are always an interesting read. Some brief notes below – these are for personal reference only, any mistakes are my own.

Regarding their fund allocations, he discusses the importance of forging deep and long-lasting relationships with managers they know and trust. The fund is still invested in four of the original five managers they identified ~24 years ago (the fifth returned external capital and converted to a family office last year). Their other allocations over the years have either come from backing managers who were leaving firms they were already invested in (e.g. they have invested with firms started by 4 ex-Arisaig senior team members) or via introductions from managers they know and respect. 

In terms of current opportunities, they think Greater China looks attractive. He writes about how investor sentiment towards Hong Kong is about as negative as he can recall in his ~30 years of investing there. He also thinks there are opportunities in Taiwan, with a special mention of TSMC. The fund currently owns three direct holdings in Hong Kong: Swire Pacific, COSCO Shipping International and Value Partners, which is the HK-listed asset management company started by Cheah Cheng Hye.

They started buying shares in Value Partners in October 2022 when the share price was under HK$2/share (current share price is HK$3.40/share). They value the business at ~HK$5.00/share. Cheah Cheng Hye still owns ~25% of the company and OAM thinks that Value Partners has the opportunity to become in Asia the equivalent of what Fidelity is in the US.

In other parts of Asia, they think Vietnam looks particularly interesting. Valuations are now as cheap as they have been in a decade and they expect the fund’s exposure to Vietnam to increase in the near future. He also thinks there are many excellent businesses in Malaysia that have been ignored by investors and are very undervalued. Finally, one other idea he shares as an example of a well-run, growing and reasonably valued company is Narayana Health, which has 20 hospitals in India and 1 hospital in Cayman. The company is still majority owned by its founder and his family. They offer many medical procedures for consumers at significantly lower cost while maintaining a high level of quality. The business model is highly scalable, both across India as well as internationally.

For those who are interested in learning more about Narayana and its founder Dr. Devi Shetty, they are profiled in episode 4 of the Netflix series Surgeon’s Cut (trailer below).