(Bloomberg) -- A South Korean fund manager who has a track record of beating peers is betting on new trends for the post-pandemic economy, including such themes as robots, the environment, health care and the changing shopping habits of millennials.
Lee Ha-yoon, manager of the Midas Miso Mid & Small Securities Master Investment Trust, said he recently added stocks related to health, “distancing culture” and automation. The strategy has worked, with the fund notching a 22% year-to-date return, beating 99% of its peers.
The benchmark Kospi index is nearly flat for the year, having rebounded about 50% from its March low, helped by reopening global economies and stimulus. Meanwhile, the Kosdaq Index up 12% year to date, driven healthcare and technology shares with increasing digitization of fields including entertainment, education and shopping.
“During the March outflow, we didn’t buy underd or oversold stocks, but we focused on how the world would change after Covid-19,” Lee said. His fund’s two biggest holdings are Korean Internet giants Kakao Corp. and Naver Corp., which Lee likes for their exposure to artificial intelligence.
The fund’s top 10 holdings also include L&C Bio Co., a medical equipment maker whose shares have quadrupled this year, and Leeno Industrial Inc., a maker of chip testers whose stocks has gained more than 60%.
Midas International Asset Management Co. had total assets under management of $6.9 billion as of June 9. The strong performance of its Miso Mid & Small Cap fund this year isn’t a fluke -- it’s beaten 99% of peers over the past one- and three-year periods as well.
Lee’s objective is particularly challenging, given the long underperformance of South Korea’s smaller stocks. While the Kospi Large Cap Index has gained 13% over the past five years, gauges of the benchmark’s small and medium-sized stocks are down about 20% each.
“Honestly, it’s hard to survive in Korea with a small- or mid-cap active investing strategy,” Lee said. “The investing trend is changing here, we see lots of inflow into passive funds.”
Lee is hoping his eye on changing trends will help him continue to outpace the market and competitors. He said he would like to add more Korean automation stocks. The fund has also been acquiring shares of duty-free and department store operators this year as part of its investment focus on spending by the nation’s younger generation.
“The biggest characteristic of Korea’s millennials is they are not trying to buy a $1 million house or a $100,000 car -- what they buy are $10,000 luxury items for themselves,” Lee said, citing the firm’s analysis. “Well, for now, I don’t like auto stocks but I guess millennials may buy cars if the virus makes them reluctant to use car-sharing services.”
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