Schroder Asian Alpha Plus: September 2021 fund update

• This fund offers a way to access long-term growth potential from across the Asia Pacific region
• Richard Sennitt and Abbas Barkhordar took over the fund’s management at the end of March 2021
• They have the support of a robust team of analysts based across the region to sift through the market and uncover some of the most exciting opportunities
• This fund is on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The Schroder Asian Alpha Plus fund aims to provide growth by investing in larger companies across Asia, based in countries such as Hong Kong, Taiwan and South Korea. It could fit an investment portfolio that may suit exposure to a more adventurous fund, which includes higher-risk emerging markets, in the pursuit of long-term growth. The fund could be used as part of a globally diversified portfolio and provide exposure to Asian markets.

Manager

Matthew Dobbs stepped down as manager of this fund on 31 March 2021. His long-term colleague Richard Sennitt took over as lead manager of the fund, with support from co-manager Abbas Barkhordar. Until late 2021, Dobbs has taken on an advisory role, in which he offers ongoing support to portfolio managers and analysts at Schroders.

Sennitt is another veteran Asian fund manager. He joined Schroders in 1994 and has since focused on Far Eastern markets. He worked closely with Dobbs from 2007 and helped to build Schroders' Asian equities capabilities based in London, along with its range of Asian and smaller companies funds.

Sennitt was previously alternate manager of Asian Alpha Plus, so he knows the fund well. He has also managed the Schroder Asian Income Fund since 2006, as well as a few other Asian income portfolios that are run similarly. In addition to taking over Asian Alpha Plus, he assumed responsibility for the Schroder Asia Pacific Fund, an investment trust previously managed by Dobbs. Sennitt handed over some of his existing responsibilities to other team members, to free up some of his time to focus on these portfolios.

Barkhordar joined Schroders in 2007 and was an analyst on the Emerging Markets Equities team. While he has applicable analyst experience, this is Barkhordar's first fund manager role, and as such he does not have his own track record.

There are thousands of companies in this part of the market, so the managers have the help of a team of analysts based across Asia. They help sift through the market and uncover what they believe to be the most promising opportunities.

Process

Sennitt and Barkhordar aim to spot Asian companies with exciting potential, before they're noticed by other investors. They believe they're able to do this thanks to the in-depth analysis carried out by their well-resourced investment team.

The managers work closely with Schroders' Asian equities team to help generate research and ideas for the fund. They look for companies they think can sustain returns over the long run. They should have good cash flows, strong franchises, a quality management team, superior corporate governance standards and a strong business model that's able to defend against competition. Next, they aim to forecast the earnings of each business, which could ultimately influence the direction of the share price. Importantly, the managers will only invest if a company's shares can be bought at a price that doesn't yet reflect its longer-term earnings potential.

While the managers mainly focus on individual company analysis, they also consider economic factors to provide broader context to their research. This may involve looking at inflationary trends, monetary policy and employment trends, amongst other factors.

At the moment the fund is focused on sectors that can be more sensitive to the health of the economy but could benefit from longer-term trends such as the growing use of technology and online consumer spending. This means the fund is currently focused on sectors such as technology, financials and consumer services. Some of the largest investments currently include tech businesses TSMC (Taiwan Semiconductor Manufacturing Company), Samsung and Tencent, as well as financial services firms HDFC Bank and AIA Group.

The managers have recently reduced investments in the Chinese tech sector, including Alibaba, due to increased regulatory and competitive pressures. They have been focusing more on companies based in Hong Kong, Taiwan, Indonesia and Singapore. Please note the managers can use derivatives which, if used, add risk. They mainly invest in larger firms, but they also have the ability to invest in higher-risk smaller companies.

Culture

Schroders is a well-established asset manager with offices all over the world. It believes the importance of Asian and emerging markets in the global economy has increased significantly over the years and expects this to continue. We think Schroders is dedicated to investing in this part of the world and supporting the teams that invest there.

Environmental, social and governance (ESG) issues have always formed part of the team’s company analysis. Good corporate governance has always been key to the process, while the importance of environmental and social factors has also increased in recent years. The managers also engage with companies on how they can improve on sustainability issues.

Cost

This fund is available at an annual ongoing fund charge of 0.84%, which we think is reasonable value for a fund in the Asia Pacific ex Japan sector. The HL platform fee of up to 0.45% per year also applies.

Performance

Richard Sennitt has an extensive track record investing in Asia. He has managed the Schroder Asian Income Fund since 2001 and over this time it has performed better than the broader Asian stock market. This fund is different as it aims for income and growth, though a similar investment process is used on both this and the Asian Alpha Plus fund. As always, past performance is not a guide to future returns.

Since taking over Asian Alpha Plus, it has performed broadly in line with its peers in the IA Asia Pacific ex Japan sector, though this is over a short timeframe. Recently, having less invested in China than the benchmark has helped as the Chinese market has been weaker this year.

Our analysis also shows companies including Singaporean consumer internet company Sea Ltd, Indian hospital chain Apollo Hospitals and Techtronic Industries, a power tool company based in Hong Kong, have also performed well. Chinese companies including Alibaba, Tencent and Ping An Insurance have been weaker.

Patient investors have been rewarded with good long-term returns, though the fund’s investment style means it’s tended to be more volatile than the average fund in the IA Asia Pacific ex Japan sector. We think the fund has good long-term prospects, though there are no guarantees how the fund will perform in future.

Past performance isn't a guide to the future. Source: Lipper IM to 31/08/2021.

Find out more about Schroder Asian Alpha Plus including charges

View Schroder Asian Alpha Plus Key Information Document