Having an edge: Q&A with Perpetual's Garry Laurence on the Global Share Fund

I grew up in a family business and always wanted to be involved in businesses. When I was at university, I started investing and reading books about Peter Lynch and Warren Buffett. I realised that the best way to understand businesses and strategy was to analyse the best businesses around the world. You don't need to come up with a revolutionary idea and set up a business, you just need to invest alongside the best entrepreneurs and their businesses in order to build wealth over time.

We have been investing in online businesses since the inception of the fund seven years ago. We recently invested in Vipshop which is a leader in online apparel retailing in China. They have over 60 million active customers and this customer base is growing at 20% per annum. Recently Tencent and JD.com took a stake in Vipshop and we think these investors will help them to grow their customer base into the hundreds of millions and we expect their operating margin to grow over time as the business scales up.

We invest in quality businesses at value prices. We look for companies that generate consistent free cashflow growth and are led by strong management teams that are aligned with shareholders. Finally, we only invest in companies that have strong balance sheets.

Perpetual has a long tradition in running concentrated portfolios. We have the view that you only need to invest in a small number of companies that you understand, and can stay close to, in order to outperform.

We stick with our strict investment strategy and focus on sectors in Asia which have structural growth drivers. Our investments are focused on the services sector which is growing very quickly. Our investments are in the technology, consumer and healthcare industries and we focus on owner managed businesses with strong balance sheets. At the moment we can invest in a number of these businesses at attractive valuations like Vipshop.

I have learned to stick with your investment view and conviction no matter what other people tell you. I have heard many views about my investments from a variety of stakeholders over the years. This is very similar to what makes the stock market move every day as share prices are a reflection of different investors' sentiment on a given day. What I have learned is that when your view is different to most people and you are right, that's when you make outsized returns. You just need to be patient and ignore the noise.

The big global investment themes for 2018 will include the rate of global inflation and the extent of the unwind of stimulatory monetary policy. Rising interest rates will negatively affect overly leveraged companies and benefit banks with large, low cost deposit bases. Relatively high valuations in certain parts of the market will also be an area to watch. We think there will be a resurgence in the performance of value investing in 2018.

I have had a number of memorable investments in the technology sector over the years. Our investment in YY.inc, a leading online video portal in china, is probably one of my most memorable as it has tripled in value in the space of a year.

I have been privileged to have worked with some of the best investors in Australia such as John Sevior, Matt Williams, Paul Moore and our current head of equites, Paul Skamvougeras. I have learned a lot from each of them but mostly I have learned that every investor is different with different skills.

You need to know what your strengths are and concentrate your investments in businesses where you feel you have an edge and have a view different to the market.