Although economic growth rates have slowed in recent decades, one Woodland Hills company thinks there has never been a better time to be alive and fully invested than right now. Guinness Atkinson Funds, a boutique investment management firm, focuses on three themes when searching for opportunities – Asia, energy and innovation. “What separates us is we have a world view that is rare,” said Jim Atkinson, co-founder and chief executive of Guinness Atkinson. The company’s outlook stems from its belief that human progress is at an all-time high with more people than ever having access to better living conditions, including increased access to food, water and clean air as well as higher literacy rates, income and gross domestic product per capita. To Guinness Atkinson, human progress is the notion that life is getting better and continues to improve. Furthermore, Jim Atkinson feels the planet is rapidly changing, spurring an influx of new opportunities. “Those are two big things that are difficult to overlook if you are going to invest people’s money,” he said. The company’s clients come in two varieties, advisers and self-directed investors. The majority of the asset management firm’s money comes from the latter, who invest either directly or through a broker. The company manages about $350 million in assets, but has been more than double that size in the past. Atkinson attributed the decrease to underperformance in China and a drop in oil prices. However, he believes his firm is well positioned for future development. “We expect some serious growth to occur in 2016 and 2017,” he said. “I think our themes are well aligned with where the planet is going.” With a 6.7 percent return on investment, Largan Precision Co. Ltd. in Taichung, Taiwan is the current top holding in Guinness Atkinson’s Asia Focus Fund as of June 30, the most recent available data. Largan manufactures and supplies camera lens modules for smartphones, cameras and scanners. The fund itself has 39 holdings and $20.5 million in assets with a five-year return on investment at 3.4 percent and a one-year return at 2.5 percent. In total, Guinness Atkinson manages eight mutual funds, with four focused on Asia, two focused on energy, one on innovation as well as one dividend fund. According to the Organization for Economic Cooperation and Development, the combined gross domestic product of China and India will soon exceed that of the G7 economies, and by 2060, will surpass that of the remaining OECD member countries, which consists of 32 countries, including the United States. Jim Atkinson believes this accelerated growth means long-term growth for its Asia funds. Yet others are concerned with the short term. “The cons of investing in Asia are akin to the global worries dominating markets right now, specifically with respect to economic weakness in China,” said Joshua Brockwell, investment communications director for Azzad Asset Management Inc. in Falls Church, Va. “That weakness can affect countries that depend on exports to China, which in turn can affect the global economy and potentially the U.S. economy.” What Brockwell is referring to is a domino effect that can potentially occur if China’s economy continues to slow in the short run. If its economy remains weak, the country will purchase fewer exports from other countries, both in the region and globally. In the volatile energy markets, Guinness Atkinson has invested in traditional businesses since the mid-1990s but has expanded into alternative energy as well. Less than 18 months ago, oil prices were more than $100 a barrel. However, prices have plummeted to around $36 a barrel, leaving an overabundance of oil and reducing the short-term need for exploring alternative energy sources. As a result, both of Guinness Atkinson’s energy funds have suffered in the short term. As of Sept. 30, its Global Energy Fund had a -44.2 percent one-year return on investment, which is the lowest of all the company’s funds. Despite recent negative returns, Guinness Atkinson believes the world is continuing to increase consumption and production in many industries in the long run, creating higher GDP per capita. It argues that production requires energy, and traditional energy resources are dissipating overall, forcing companies to explore alternatives. “Long term, alternative energy is a rational investment for many reasons, not least of which is the fact that the business model for traditional energy companies is looking archaic,” said Azzad’s Brockwell. “With the recent climate change accord reached in Paris, it should be obvious that the world is moving away from conventional sources of energy.” Twist on innovation The company’s third investment focus, innovation, includes more than new technology. “Our view of innovation is slightly broader than most people’s,” said Jim Atkinson. “If you have an innovative edge in your business, you have a better ability to compete, higher profit margins and are more likely to succeed. That’s been the story behind that fund.” The firm does not typically buy the hottest new companies but invests in businesses with innovations that have stood the test of time. For example, one of its top holdings in its Global Innovators Fund is eBay Inc. But Christopher Tang, professor at UCLA’s Anderson School of Management, said big innovations are hard to predict. “When you are dealing with energy or innovations, there is no easy way to pick winners because of market uncertainties and regulation uncertainties, not to mention unproven technologies,” he said. “So, these are high-risk, high-return investments. The challenge is to pick the winner.” When researching potential investments, Guinness Atkinson conducts a lot of bottom-up research at its London office, its only location besides Woodland Hills. The company has 14 employees in London, where the funds are managed, while its San Fernando Valley location has five employees responsible for the business side of the firm. Most investment management companies are in New York or other financial hubs, but Jim Atkinson has good reason to set up shop here. “Because I live in the Valley,” he said. “It’s really congested on the Westside and in Los Angeles and Century City. It’s not that we are void of that here, but it’s much easier.”
Positive On Progress
