Driehaus Capital Management
Chad Cleaver manages two of the highest-rated emerging markets stock funds in the world.
- Emerging markets fund manager Chad Cleaver of Driehaus Capital Management told Business Insider about how he's investing around the effects of the Wuhan coronavirus outbreak.
- He says China's largest online health platform is getting a big increase in traffic, and he expects growth in infrastructure spending nationally when the outbreak subsides.
- Cleaver co-manages the Driehaus Emerging Markets Growth Fund, one of the best in its category over the past two decades, and Driehaus' EM small-cap fund, which beat 99% of its peers in the last year.
- Visit Business Insider's homepage for more stories.
Global markets have been upended by the spread of the coronavirus, and things have gotten especially rocky in emerging markets because of the outbreak's effects in China.
It's a frightening time for investors, but it's a bit less worrying for those who know the terrain. One of those is Chad Cleaver, co-manager of two enormously successful emerging markets funds. The Driehaus Emerging Markets Growth Fund is ranked by Kiplinger as the third-best emerging markets stock fund of the past 20 years. The Emerging Markets Small Cap Fund, meanwhile, beat 99% of its peers over the last year.
In an exclusive interview with Business Insider, Cleaver said the outbreak is driving a shift that's likely to benefit one of the fund's investments in China. He says Ping An Healthcare and Technology might stake out an even more powerful position.
"It's China's largest online healthcare platform and they have a strong moat associated with the business," he said. "Since the outbreak of the virus, they've had over 1 billion cumulative visits to their platform, and prior to that they were tracking at about 650,000 average online consultations per day."
A billion cumulative visits spread out over two months is more than 16 million per day.
Cleaver says he was optimistic about the potential of the Ping An Good Doctor platform based on its links one of the biggest insurers in China. But the company may have risen to another level now.
"It was already demonstrating strong growth, and they have a considerable lead in this space with about 50% market share," he said.
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Cleaver, who manages the EM Growth Fund alongside lead portfolio manager Howard Schwab and co-manager Richard Thies, adds that he's been encouraged by the Chinese government's efforts to prop up the economy in the two months following the start of the outbreak. He thinks those will eventually pay off.
"We are encouraged by the response of monetary policy through liquidity injections in China, additional policy support through things like tax waivers and subsidies," he said. "We're watching for when people go back to work and activity levels improve. We'd expect to see pent-up demand start to be realized."
Specifically, Cleaver says he expects growth in infrastructure spending once the outbreak subsides, and expects to look at makers of machinery and cement, among others. Elsewhere he'll search for companies whose earnings potential has been written off during the epidemic.
"In times of market stress like this, we're looking for these recovery growth opportunities and carefully identifying these types of situations as they may present themselves," he said.
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