Le Cornu emphasises the importance of “speaking to companies” and “seeing the whites of the eyes of the CFO [chief financial officer]” in a market that he says has intrinsic value but is also very inefficient.
“The beautiful thing about Asia is it’s so inefficient,” he says. “There’s 10 countries, 10 different currencies, 10 different governments and a lot of difference in terms of the marcro-economics. It’s not easy. A lot of people look at Asia and they think it’s too hard.”
He believes the untapped potential of stocks on the boards of Shanghai and Shenzhen are ripe for investing but that a measured approach is key.
“China A-Shares, for me, it’s the last frontier. It’s the last place you can go down, put your pan into the river and fossick for gold. There’s not a lot of people from an international point of view, who are doing that in China A-Shares.
“They key thing to investing in Asia is it has to be disciplined. In Asia, it really pays to be patient and that’s what separates good managers from those that come and go.”
Le Cornu says having a strong team with diverse skills is also incredibly important in navigating Asia.
“With Duke Lo and John Lam, we’re a team. It’s not something we just pay lip service to, it’s incredibly important. We want to be together for the rest of our careers. I can’t underestimate how important they are.
“We have a 10-year relationship working together and it’s kind of special because we just know each other so well and it’s that stability of working together that I think will make Stonehorn a big success.
“We’re very different but it’s because we’re different that it works. John Lam is by far the smartest person I’ve ever met in terms of intellect and Duke is just an incredibly hard worker. He’s results driven and has a phenomenal track record.”
The growth in Asia’s middle class is a key opportunity for Stonehorn, which sees consumer-facing stocks as some of the best investment opportunities.
“What we’re looking for is industries where there’s a 20-year trend,” Le Cornu says. “Think about the rise of the middle class and think about their disposable spending. Anyone who’s been to Asia and been to the airports knows tourism is a very big sector and a growing sector.
“We like consumer services, internet, we like consumer discretionary. Retail sales are growing at 9 to 9.5 per cent, so it’s a GDP-plus sector, so that’s a great sector for us. We’re also selective on new industries where we think China can be world leader such as batteries, robotics and AI.”
Learning from the best
Le Cornu’s interest in Asia was sparked during his university days.
“I studied Asian studies and did a Japanese major at university and I had a stint in an exchange program in Japan, so I went to school there for a summer,” he says.
“My grandfather really encouraged me to do that. He was a World War II veteran and he said it was really important to look at Japan and what they’re doing. The only thing he got wrong is I probably should have learned Mandarin!”
Born in Adelaide, Le Cornu’s first job was as an associate analyst at MMC Asset Management. “[Erik Metanomski] essentially took me under his wing and taught me how to analyse companies the old-school way,” he says.
After six years with MMC, he moved to Paradice Investment Management as a senior portfolio manager.
“I joined David Paradice who’s obviously a legend in the boutique world in Australian equities,” he says. “I got that benefit of going to company visits with him, learning from him the art of scuttlebutt. Speaking to customers, competitors, suppliers and up and down the value chain. That really helped in terms of working out the best quality companies to find.”
In 2007, Le Cornu was approached by Macquarie to run the company’s equities strategy in Asia. He jumped at the opportunity.
“From the start to the peak, it went from a small business to having over $4 billion worth of assets under management.”
Going it alone
After more than a decade working for Macquarie, Le Cornu alongside Lam and Lo decided to move into the boutique world.
“I call it a boutique but it’s been set up with what I’d say are very high-quality, world-class back offices and operations in terms of the way we’re setting up our fund.”
Stonehorn represented a unique opportunity, as an Asian-based boutique.
“There’s just not many boutiques in Asia with an Australian heritage. Duke Lo and John Lam both went to university in Australia so it has an Australian look and feel to it. [Boutiques] are much less common in Asia but it’s only a function of time that there will be more.”
The trio are being backed by Alan and Carol Schwartz’s Trawalla Group, which will also be a large investor in the fund.
“They believe in Asia and they think investing in Asia makes sense,” Le Cornu says. “Trawalla viewed it as a very inefficient space and if there’s one market they’re going to allocate capital to in term of equities or asset management, it’s Asia.”
Having spent the past decade travelling through Asia, Le Cornu believes Hong Kong is the ideal place to base Stonehorn.
A self-described “family man” Le Cornu says he keeps life simple, cycling and competing in iron man events between home life and work.
“For me, getting out very early in the morning and going for a very long cycle before I start the day is something which just gets me going but it’s not always easy to do in Hong Kong because of the traffic.”