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Asia tech — Innovation beyond the index: Q&A

In this Q&A, Portfolio Manager Yash Patodia shares views on how best to access the massive Asia tech opportunity and profiles a few potential risks for the sector.

The views expressed are those of the authors at the time of writing. Other teams may hold different views and make different investment decisions. The value of your investment may become worth more or less than at the time of original investment. While any third-party data used is considered reliable, its accuracy is not guaranteed. For professional, institutional, or accredited investors only.

KEY POINTS

We believe:

  • Asia tech is creating the innovations fuelling the digitisation of nearly every segment of the economy and this disruption will continue, driving persistent opportunities for the sector.
  • Many of Asia tech’s most attractive opportunities cannot be accessed with passive exposure. After all, the true opportunity set has more than 1,000 companies outside the MSCI AC Asia Pacific IT Index.
  • A pan-Asia approach to tech is crucial to accessing a richer opportunity set including all of the regional winners, particularly as the leading Asia tech markets are highly variable by year.
  • To harness tech’s innovation and disruption opportunities early, it’s critical to have a pulse on the complete tech landscape — for both public and private companies.

We believe Asia tech is the future innovation hub of the world, offering a long runway for growth driven by technological disruption. The region is the population center of the globe, the backbone of tech’s supply chain and manufacturing and the home to a huge number of small tech companies offering exposure to key secular themes across industries.

In fact, Asia has over 1,000 smaller-cap tech companies, more than double that of North America and Western Europe combined1. We believe Asia tech therefore can offer a depth and breadth of opportunities that global tech typically cannot. After all, 70% of the world’s tech companies are in Asia but the region represents only 17% of the MSCI All Country World IT Index2.

In this Q&A, Yash Patodia shares his views on how best to access the massive and underappreciated Asia tech opportunity and profiles some potential risks for the sector.

Brian: Yash, you have a long history with disruptive tech. Tell us how that started and why innovation and disruption are so important to your investment style.

YASH: My background in tech began before I started investing in the sector. Out of university, I worked in the mobile phone division at a major US tech company which, at the time, produced the leading smartphone platform globally. I witnessed firsthand why a company needs to remain innovative, as our leading position got disrupted by a competitor that soon came to be synonymous with the smartphone market. The rug was pulled out from under us and we were unable to adapt. This experience made it clear how vital it is to understand the industry’s competitive landscape and for management teams to invest to stay ahead of competitors.

In my view, this innovative mind-set is as relevant now as ever before. The sector is ripe with opportunities powered by disruptive and innovative companies. I believe it is crucial to track these companies from an early stage in their growth journeys because disruption is…

To read more, please click the download link below.

1This represents companies with under US$5 billion in market cap. Sources: FactSet, Wellington Management, December 2020. | 2Sources: FactSet, Wellington Management, MSCI All Country World IT Index. Data as of 31 December 2020.

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