Asian equities and a change in market sentiment
Over the past few months, markets around the world have witnessed value stocks outperform growth...
Asia Pacific is an intriguing mixed bag for investors, comprising both developed and developing countries and offering some of the best growth opportunities in the world. These opportunities come hand-in-hand with their fair share of risk and July 2017 is a good reminder of this. It marks 20 years since the Asian financial crisis, where currencies plummeted and many economies went into recession.
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For some investors, however, the risks of the region have paid off over the long run. While none of our Elite Rated Asian equity funds were quite around back in 1997, many of them have long track records of outperformance and three have delivered total returns in sterling of more than 200% in the past decade.
What’s more, these funds are well positioned to take advantage of potential future growth in the region with their focus on sectors such as consumer and information technology, and their experienced fund managers who know how to find companies with a strong sense of responsibility towards their shareholders. These factors have helped their funds not only to beat their sector peers but, in many cases, to do so with less volatility.
An investment trust run by the same manager who looks after Elite Rated Schroder Asian Alpha Plus fund, Schroder Oriental Income has delivered exceptional returns for its shareholders thanks to a focus on valuations and a willingness to invest in ‘non-consensus’ ideas. The trust currently makes the most of its Asia Pacific remit to hold a mix of developed and developing countries including Hong Kong, Australia, Taiwan, Singapore, China, South Korea and Thailand. The income approach adds a relative stability to this trust versus many others in the region, especially when combined with the manager’s total return mindset.
China’s macro risks aside, this fund has consistently delivered positive performance over a long time period and has been a firm favourite of FundCalibre directors for many years. It got so popular that it had to close to new investments for four years, re-opening only in February 2016. The ‘Greater China’ mandate incorporates Hong Kong and Taiwan too, and this has helped the fund to be less volatile than some of its peers. The fund currently has just under 30% invested in Taiwan, which is a notably more defensive market than mainland China. Consumer discretionary and healthcare are key themes where the fund is overweight versus the index.
A concentrated way to invest in Asia, this fund has around 40% invested in its top ten holdings and a total portfolio of just 44 companies across India, Taiwan and Hong Kong, as well as small allocations to developed markets including Japan and Australia. It has achieved its outperformance by backing quality, sustainable companies for the long term. Managers David Gait and Sahi Reddy, who also run Elite Rated Stewart Investors Asia Pacific Sustainability, invest with a stewardship mindset and don’t trade unnecessarily, which has helped the fund to be less volatile than the sector.
^FE Analytics, TR in GBP, 10/07/2007–10/07/2017