The long and short of it
Jun Bei Liu's positivity and warmth are truly infectious, her story at once impressive and inspiring. In fact, I'm so enthralled by her willingness to open up about her humble beginnings, and her strength in achieving all that she has, against all odds, that I forget to record our interview.
That major journalistic blunder aside - Liu luckily agreed to a second interview, during which she shared some of the moments that have shaped the investor she is today.
From her modest beginnings in China, to Sydney's tranquil Northern Beaches, to becoming a household name in investment management, there truly seems to be nothing that can stop Tribeca's Alpha Plus portfolio manager.
When faced with the sudden departure of the fund's senior portfolio manager, Liu rose to the occasion. Indeed, since she took over Tribeca's long/short portfolio, its funds under management has tripled in size. But Liu says she is just at the beginning of the journey.
And while naysayers predict the end of a great bull market, Liu argues a further 8-10% rise could be on the cards. She's positive that local inflationary pressures will be transient and is approaching any volatility as a buying opportunity.
And just because I know Livewire's readers love a stock pick, I asked her to share three stocks that she believes will outperform over the coming months - one of which she reveals as her largest position.
The making of Jun Bei Liu
Having emigrated from China to Sydney's coastal Northern Beaches at the age of 16, Liu recalls being startled by the quietness and tranquillity of her new home.
"Australia was beautiful and so quiet compared to what China was like. Back then, China was quite poor. We had no telephone, no running water; we had very limited access to things," she says.
In six months she was able to pick up the language. On graduating, she decided she wanted to pursue a career in finance, hoping to build a better life for herself and her family.
"My parents always told me to have more realistic goals. And that's part of the education that we received when I was in China as well. But when I first came to Australia I had a teacher that was so encouraging and made me feel that anything was possible, and that certainly planted a seed in me to want to see what's possible," Liu says.
Liu, perhaps surprisingly, immediately found finance fascinating and was enthralled by economics and the study of behavioural finance.
"People tend to think finance is very precise, but it's actually not. There are so many behavioural influences and incentives that impact the way we manage money. So, I just found it very fascinating," she says.
In her final year of university, Liu nabbed a role working as a junior analyst at Aspect Huntley - later acquired by Morningstar for $30 million - one of the first retail investor newsletters to be distributed in Australia.
"It was incredibly exciting; to be in the presence of someone who's managing a $300 million turnover company. It was incredibly rewarding, I learnt so much from them," she says.
After two years with Huntley, Liu moved to small sell-side broker Foster Stockbroking, where she stepped up as a lead analyst and developed what would be life-long connections with leaders within the industry.
She then landed a job at Tribeca, where she worked for nine years as an analyst. During this time, Liu says she allowed her career to stall to become a mother.
Life at Tribeca
"After my second child turned one, I certainly found that I wanted more with my career. I had gone through all the training, I had all this experience, and I had a good track record in stock picking. I didn't want to let it go and I knew I could do more outside of being an amazing mother," Liu says.
"At every point in my life, there have always been people who say that I can't do certain things, and I just want to prove them wrong and see how far I can go."
Soon after, Liu was named the co-portfolio manager of Tribeca's Alpha Plus Fund, a long/short Aussie equities product, where she worked for around four years alongside the firm's senior portfolio manager, Sean Fenton. But in 2019, Fenton suddenly left the fund - moving to start his own boutique equities firm, Sage Capital.
"It certainly was a life-changing period. I had to demonstrate to clients who I didn't know that well - because Sean was fronting the fund - that I had a good track record; that I had the experience," Liu says.
And yet, the fund's largest clients - the likes of UniSuper and some of its largest retail clients stuck by the fund, Liu says.
"When Sean left, the fund's FUM was sitting at about $330 million. And it took me around 12 months before we started seeing inflow. Now we have almost a billion dollars in FUM and we are just at the early stages of this journey," she says.
Since taking over the fund, Liu has delivered investors an outperformance of nearly 8% per annum (17.01% over the benchmark's 9.05%). What's more, the fund has returned more than 40% over the past 12 months (an outperformance of 10.08%).
Liu's current (optimistic) market outlook
Looking forward, Liu is optimistic about the outlook for the Aussie market and believes we could be in for an 8-10% rise in the S&P/ASX 200 over the coming 12 months. However, with that in mind, she believes we could be in for a bit of volatility.
"We have had a rally in reopening stocks, we have had a rally in expectation of better economic growth. So, the share market has priced in quite a lot of positivity. We have reached a point where some investors will be a little bit swayed by bond yield risk. But for the long-term investor, any sell-off creates a buying opportunity," she says.
On the inflation front, Liu - like the world's central bankers - believes we are likely to only experience a transitory period of inflation - rather than a long-term rise in rates.
"At this point, what has driven the latest inflation statistics is really shorter-term factors," she says, the first being the closure of most of the world's borders - causing a lot of disruption to labour availability.
"We're seeing rising prices through demand and supply shortages in the labour space. And we're also seeing commodity prices rally very strong, partly because of supply disruption in countries like Brazil," Liu says.
"And at the same time, with most economies closed over the last 12 months, people couldn't spend a lot of their stimulus checks on services so they spent their savings on goods purchases online."
This is set to normalise over the coming 12 months as economies reopen, she says, providing some relief for the demand for raw materials. This should be further alleviated with China cutting back on credit growth, Liu says.
"At this point, we're just not seeing any of those factors that will see inflation last for years and years. At the same time, corporate balance sheets are probably the strongest they have been in years because of all their capital raising and cost-cutting - and with the strong demand environment corporates can push through price increases," she says.
"So, with all of that in mind, we think it's not an alarming sign for equities."
Why there's more runway for BNPL
She is also still bullish on Buy Now Pay Later (BNPL) and revealed that she had used the recent sell-off as a buying opportunity, topping up her holdings in Afterpay (ASX:APT) and Zip (ASX:Z1P).
"To generate consistent returns, we are happy to buy out of favour stocks. We manage a portfolio on a balanced basis. So at any point in time, we won't have a skew towards growth or value, we just go after wherever the returns might drive us," she says.
Sometimes, the best way to generate a return is to take advantage of short-term price weaknesses, Liu says ... and the BNPL sector has certainly been out of favour.
"To me, that presents an opportunity. We're a big believer in this sector and we certainly believe the market leaders will do well," she says.
3 promising stocks for the coming 12 months
She is also backing three stocks to outperform over the coming 12 months, Treasury Wine Estates (ASX:TWE) - her largest holding, Domain Holdings (ASX:DHG) and ResMed (ASX:RMD).
"With Treasury Wine, we think the share price is still yet to capture the brand's premium issuance it deserves to be on," Liu says.
"The share price was under a lot of pressure when China increased its tariffs because of the trade conflict with Australia. But it has been gradually recovering. And it's because the brand is very strong and they're able to find a lot of demand around the world, particularly for its premium label Penfolds."
Liu says her team sees significant opportunity in Treasury Wines and notes "quite a big part of the share price is underpinned by their assets"; that being wine and land.
Domain, in comparison, is set to do very well over the coming 12 months thanks to two main factors, Liu says.
"One is that Australia is just coming off a very low housing listing environment. Now we are seeing that coming back up, with the latest figures showing listings are up 70%. Domain, being the second-largest real estate listing platform in Australia, is very well leveraged to that," she says.
Domain's market cap is six to seven times smaller than REA Group's, Liu says, and yet it has similar exposure in the Australian market. The main difference between the two players is that REA has spent the last decade focusing on growing yield while Domain plays catchup, she says.
"So far they've done very well. We think this company will deliver significant growth over the next couple of years," Liu says.
Meantime, Liu picked up ResMed during a recent sell-off and believes it to be a high-quality business currently out of favour with investors.
"It was partly a COVID-beneficiary because of its ventilators. But our view is that the core business, the sleep apnea business, was actually impacted by the COVID-19 lockdown and now over the next 12 months is a reopening play," she says.
She expects Resmed to grow in the high single digits over a 12-month view and will grow at double-digit rates again moving to a two-year view.
Nurturing the next generation of investors
In her spare time, when she is not thinking about long and short investment opportunities and raising two children, Liu is volunteering to help the next generation of fund managers. She sits on the executive committee of the Alternative Investment Management Association and is an advisory committee member for Australian Students Asset Management.
"It's incredibly important for fund managers to nurture the next generation of investors because this is an industry that's extremely dynamic. Gone are the days where we can keep referring to the old rule that use to work, simply because we have so many different types of investors; passive, active, quants, fundamental," she says.
Market conditions are shifting - Liu adds, so it's paramount that investors try to siphon out the noise.
"The share market has always been filled with so much noise. And the worst thing an investor could do is to panic," Liu says.
"Market conditions are changing, it's becoming more volatile. And there are a lot more passive funds in the marketplace; providing great opportunities for active investors."
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Ally Selby is a content editor at Livewire Markets, joining the team at the end of 2020. She loves all things investing, financial literacy and content creation, having previously worked for the likes of Financial Standard, Pedestrian Group, Your...