Page 56 - Forbes - USA (November 2019)

Déjà View
ENTRANCE FEES

“Tariff Man” has plenty of company: The United States and Russian Jewish immigrants.
has been taxing an array of offbeat imports for more

than 200 years. When Mehta was in grade school, she would
sometimes stay with her grandparents in the small

2019: When President Trump’s next tariff round kicks in on
December 15, iPhones made in (where else?) China will face desert town of Bhiwani, west of Delhi, where her
a 15% levy, meaning even the cheapest iPhone 11 model will family was transplanted after India and Pakistan
run an extra $100—assuming Apple doesn’t absorb the cost.
52 were partitioned in 1947. Her grandparents’ three-
1930: The notorious Smoot-Hawley Tariff Act takes aim at

childhood itself, whacking toy dolls with a 90% import fee. room house had intermittent electricity and no
1890: Before he would rise to the presidency in 1897, running water. Sewage ran through the streets. HOW TO PLAY IT
T
N Representative William McKinley pushes a tariff bill “I lived among children begging in the streets, According to
E through Congress that includes a 60% tax on imported
M eyeglasses and lenses. His future veep, the bespectacled in homes with poor sanitation, and was greeted Brendan Ahern
E Teddy Roosevelt (above), surely squints in disapproval. daily with monkeys, pigs and cows meandering
R For those un-

I 1816: The first explicitly protectionist trade measure in into our home,” she says about her summer visits

T able to afford

E U.S. history slaps a 30% tariff on foreign-made umbrellas to India. “I was fascinated by my sameness with Acadian’s high
R (among much else)—bad news for Americans that Septem-

ber, when a tropical storm batters the former colonies. minimums, there’s

• them [the children], yet our differences were so KraneShares

G Sources: St. Louis Federal Reserve; U.S. Trade Representative. big. This intellectual curiosity from childhood fu- Bosera MSCI
N China A (KBA),
I eled my career in emerging markets.”
T a $564 million
S Acadian Asset Management Cont. For college Mehta headed to Stanford thinking ETF geared to
E
V opening up. Until recently, most foreigners could she would pursue medicine, but in 1999 while in retail investors
N invest only in H-shares of select big companies, rural India on a Unicef-funded internship in pub- who believe the
I biggest growth
which were traded on the Hong Kong Exchange. lic health, her funding fell through. market in China
Now non-Chinese investors can directly buy so- “[It] got me thinking that if you really want to is in mainland
Chinese equities.
called A-shares. “All the major benchmarks began support development there, it’s not going to hap- Its chief invest-
adding the A-shares to their emerging markets in- pen through medicine. It had to happen through ment officer,

dices last year,” Mehta says, “so there will be a wall financing,” she says. Brendan Ahern, is

pound-the-table
of money moving in.” After graduating from Stanford in 2000 with a bullish. “Once
The other reason has to do with Mehta’s track degree in biology and anthropology, she became China A-shares
are fully included
record. The China-heavy small-cap emerging mar- an analyst in Goldman Sachs. A few years later she
in the MSCI
kets strategy she also leads, with $2.4 billion un- got her M.B.A. from Wharton, landing at Acadian Emerging Markets
der management, has returned 10.9% on average in 2007 as an analyst. Index, it will be
bigger than South

per year since its inception in 2011, beating its Acadian was founded in 1977 as a research firm Korea,” he says
benchmark by 8.6% points per year on average. by a Putnam Investments alum known for build- of the weight-
Her new China A-shares strategy is down 5.1% ing the world's first international index-matching ing. That index

has around 1,200
amid the current turmoil, but that’s only half as strategy for State Street before getting into money stocks, and China
bad as her benchmark, which is off 10%. management in the 1980s. Today the Ph.D.-heavy accounts for 500

of them. “Passive
“China represents just 5% of global market cap firm has $94 billion under management.

investments have
and could rise to 20%,” Mehta says. “Our clients The firm rejects the idea of a perfectly efficient, no choice but to

see this as a strategic opportunity to get ahead of perfectly priced market, especially in China, where buy more China
stocks if they

the flow of capital coming to China.” 80% of players are mom-and-pop investors who are following
Mehta and her comanager, Bin Shi, use al- treat the stock market like it’s a Macau casino. “The a benchmark,”
gorithms to screen some 3,500 stocks listed in word for stock market in Mandarin is ‘stir fry,’” Ahern says. The
KraneShares
Shanghai and Shenzhen for 100 fundamental and Mehta says. “There is this notion that it’s hot. It can China A fund
technical parameters ranging from price-to-book move on things people read on WeChat.” launched March
4, 2014. It’s
value and earnings surprises to relative strength “Some of our peers believe China is too senti-
up 41% since
and “abnormalities” in corporate accounting. ment-driven or idiosyncratic for quant to work,” inception ending
Their fund currently has 100 holdings, most- she continues. “But market mispricings exist be- September 30
and 25% year-to-
ly large- and mid-caps. Included among them are cause of behavioral errors. We can generate alpha date.
red chips like Kweichow Moutai and Wuliangye by systematically targeting companies that are at- HOW TO PLAY IT BY KENNETH RAPOZA; BETTMANN/GETTY IMAGES (LEFT)
Yibin, two giant state-owned liquor companies tractive on fundamentals.”
that make grain alcohol known as baijiu. Many
seem recession-proof. Kweichow has gained over
F IN AL T HOU GH T
90% this year. Yibin is up over 150%.
Mehta’s route to global money management “YOU HAVE TO HAVE A STRATEGY
IN A POSITION, STAY TRUE TO
was atypical. She was raised in Gainesville, Flor-
THAT STRATEGY AND NOT PAY
ida, by two research physicians, her father from
ATTENTION TO NOISE.”
India and her mother the daughter of German —John Paulson
F O R B E S . C O M N O V E M B E R 3 0 , 2 0 1 9