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Interview: “One of the key areas that we’re focused on is whether a company has any female board directors”

Sophia Li is a fund manager at First State Stewart. She manages the Frist State Japan Equity Fund solely on the basis of fundamental analysis and own business meetings, without reference to a market index. Sophia Li was named “Best Manager” in the category “Stocks Japan” during the Sauren Golden Awards 2018 in Frankfurt. Fondsfrau Anke Dembowski conducts an interview with her about her career and what European women can learn from Asian women (part 1 of 2 parts).

Sophia, in the category “Stocks Japan”, you have been named the best fund manager, and received the Sauren Golden Award 2018. Was this the first award as a fund manager you received? And what does it mean to you?
Yes that’s right. I was honoured and humbled to receive the award, especially as I was the only female fund manager and the youngest among the award winners. When I met Sauren for the first time more than two years ago, I was particularly impressed by their philosophy of “only investing in managers but not the funds themselves”, which clearly differentiates from other rating firms in the world. Fund management is fundamentally a people-led business. This award not only recognized the performance of our Japan equity fund, but also affirmed my personal capabilities. It’s a huge encouragement to me because I’ve literally built up our Japan equity franchise from scratch, despite all kinds of difficulties and obstacles. Therefore I felt particularly thrilled to get this award from Sauren, one of the very earliest investors who supported this fund.

During the award ceremony, you said that most Japanese companies are very hierarchically structured and that you are looking for companies with a management that is different. Are you also looking at how many women are in leading positions in a company? If so, why?
When we try to identify unorthodox management in Japan, one of the key areas that we’re focused on is whether a company has any female board directors and how much of their senior management team is made up of females. However, I have to admit that it’s still extremely rare, even among top-quality Japanese companies for them to be more gender diverse than in other countries, due to the entrenched corporate and societal cultural issues. It’s now on the top of management agenda, but will take some time to be translated into results.

Could you tell us a bit about your professional background? What did you study, and where? When did you start working in the fund Industry?
I was born and grown in Shanghai, China. Thanks to my earlier interest in mathematics and influenced by some of my family friends that happened to work in the financial industry, I picked statistics as my major in Fudan University. This helped me build a solid foundation for courses in quantitative finance. After graduating from Fudan University with a bachelor degree, I applied to Harvard University as it had been my dream to broaden my mind and study in the US. In the summer of 2009, after I graduated with a master’s degree and joined First State Investments based in Hong Kong as an investment analyst. In the first 5-6 years in First State, I was responsible for covering the Greater China market, but at the same time I have gradually shifted my focus to the Japanese market. In February 2015, I established the First State Japan equity fund and have since been primarily focusing on managing our two Japan equity funds.

You started as an analyst in 2009. Is that the normal way to becoming a portfolio Manager?
Generally, the most straightforward career path of a portfolio manager is to start as an analyst at a buy-side firm. There are though actually only a few buy-side companies that are willing to hire fresh graduates, as this job tends to require a lot of experience. First State Stewart Asia is unique in this sense as we have a strong focus on culture and therefore prefer hiring trainees with the potential to develop. Other ways to join a buy-side firm as an analyst include working as a sell-side research analyst first, or pursuing an MBA degree as an opportunity to switch career paths if you previously worked in other industries.

What did you want to become as a school girl? And what was the trigger that got you interested in the fund industry?
Mathematics happened to be my strength and interest during my school days. But what I found more valuable was to apply my knowledge to the real world and solve problems, which led to my 6-year journey to study applied statistics with a focus on finance. When in school, I did a number of internships in the financial services industry, so as to find out where my passion lay. When I worked as a summer intern in the research department at JP Morgan Hong Kong, I realized that I wanted to be the one that made investment decisions and take real responsibility. More importantly, I hoped that my performance could be precisely measured (somewhat important for a statistician), rather than being the one that pitched stock ideas to fund managers. That trigged my decision to focus on looking for jobs related to investment management. In the meantime, I successfully passed all levels of CFA and CAIA tests in order to learn more and to prepare for my future career.

Thank you very much for this interesting interview, Sophia! I have more questions, especially about Asian professional women. We’ll do the second part at a later stage.

Sophia Li

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