Schroder Asian Alpha Plus

Schroder Asian Alpha Plus has a flexible approach with few formal constraints. The manager looks to exploit stock market inefficiencies, and use some macro input, to build a concentrated portfolio of predominantly larger companies from the Asian region. Long-term manager Matthew Dobbs has recently retired and handed over duties to Richard Sennitt, who has been involved in the fund for a number of years. The investment approach has not changed.

Our opinion

Schroders’s global scale and high quality team of analysts provide Schroder Asian Alpha Plus with an important competitive advantage when investing in Asia. Richard Sennitt had been the alternate manager on this fund for many years and it will be run in the same way, which we believe should provide a continuation of performance.

Fund manager

Richard Sennitt has recently taken this fund on from long standing manager Matthew Dobbs, whom he worked alongside for many years. Richard began his investment career back in 1993 as an analyst on the Schroder Japanese equity team. In 1997 he moved onto the Pacific team, where he had broad exposure to both developed and emerging markets as a regional fund manager. He has relinquished his roles on the emerging markets funds to focus on his Asian mandates following this appointment.

Richard will be supported by Abbas Barkhordar who has joined the team as assistant fund manager. Abbas has been at Schroders for 13 years and has been a highly successful member of the Emerging Markets team. The managers will continue to make use of the firm’s extensive research team based in the Asian region.

Richard SennittFund manager

Investment process

Schroders believes markets are inefficient and that it is easiest to capture the inefficiencies at the stock level, where in-depth proprietary research can provide considerable information advantage. The manager believes long-term returns are driven by valuation considerations, but he is willing to exploit other opportunities if the investment case is strong enough. Ideas are sourced from Schroders' huge regional analyst team, brokers and the manager himself. He then invests in the best 50-70 non-consensus ideas. He will also consider other, more qualitative factors, such as barriers to entry and strength of management.

ESG

ESG - Integrated
ESG factors are integrated throughout the investment process for the whole of the Schroders fund range. The process begins with the ‘SustainEx’ tool which has been developed in-house by a 25-strong central ESG team.

SustainEx quantifies the positive and negative impacts companies have on society. It has won a number of awards and continues to be upgraded all the time. Most approaches measure impact relative to a benchmark, whereas SustainEx calculates a quantifiable overall impact. There are over 45 positive and negative externalities which have been drawn from over 400 academic studies and are applied to 9,000 global companies. The tool helps fund managers to identify previously unaccounted for ESG risks and helps them to build these risks into their valuation framework. Each individual strategy has its own ESG specialist on the team.

In addition to SustainEx, analysts also use the Context tool which allows them to add their own input. It is also used in the valuation process, with higher discount rates applied to weak ESG companies. Some companies’ ESG will be so weak that they are considered uninvestable. ESG also helps shape portfolio construction: those stocks with a higher ESG risk may have a reduced weight in the portfolio, or if the risk is high enough, no position at all.

Risk

Schroder Asian Alpha Plus typically has a similar volatility to that of the index, although it is unashamedly unconstrained. Risk is managed at a stock level and the manager avoids taking very large positions in more volatile companies. The manager does a lot of due diligence, puts a heavy emphasis on corporate governance and tries to invest in the right management teams to protect investors. Investors should also be aware of the currency risk.

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