Schroder Asian Discovery: August 2026 fund update

• The fund invests in high-quality smaller companies in Asia

• There was a recent change to the fund’s managers

• Schroders has plenty of resource, with a large analyst team providing research ideas

• This fund does not feature 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 Discovery fund aims to grow capital over the long term by investing in companies across Asia, excluding Japan. The fund invests mainly in small and medium-sized companies that offer lots of growth potential but can involve more risk because they're at an earlier stage of their development.

Given its focus on smaller companies, this fund could work well alongside other funds investing in larger Asian companies as part of a globally diversified investment portfolio. The fund has a ‘growth’ style, so it could also be blended with more ‘value’ oriented investments.

Manager

The fund is managed by Pablo Riveroll and Mohsin Memon, who took over in July 2026 when previous managers Robin Parbrook and Alex Deane stepped down to focus on other fund management responsibilities. We removed the fund from the Wealth Shortlist as a result.

Pablo Riveroll joined Schroders in 2010 as a research analyst covering Latin America. He was appointed Head of Latin American Equities in 2014 and has managed a fund investing in the region since then. Riveroll is also Head of Equities Research at Schroders.

Memon qualified as an accountant before joining Schroders in 2010 to research companies across Europe, Middle East, and Africa (EMEA). He has managed funds since 2014 and was appointed Head of EMEA in 2026.

Riveroll and Memon also manage a fund that invests in smaller companies across emerging markets, including those in Asia. Given the overlap, this provides them with some relevant experience to manage the Asian Discovery fund.

Process

Smaller companies tend to be overlooked by investors. However, many offer lots of growth potential, often because they're using new technologies or developing exciting, innovative products. The managers of this fund aim to spot those with promising potential before they're noticed by other investors.

They focus on the merits of individual companies and spend time understanding the quality, performance drivers, and valuation of each, rather than looking at which country or sector might present the best opportunities. This means that the fund can often look quite different from the benchmark.

When it comes to ‘quality’, companies should have a strong business model that can efficiently generate revenue and defend against competition. They should be financially robust and run by an experienced and aligned management team.

Companies in the fund include ‘compounders’ - those with the potential for long-term growth that can consistently invest back into their businesses over time, and more ‘opportunistic' companies, which are out of favour but have clear turnaround stories and exciting long-term potential.

The fund is made up of about 50 companies. At the end of June 2026, India, Taiwan, and China were the largest geographical allocations and together accounted for just over 60% of the fund. The amount invested in Taiwan is less than the benchmark, though. The managers also invest in Asian countries outside the benchmark, such as Vietnam, and can invest in other emerging markets such as Mexico. Remember that investing in emerging markets is a higher risk approach.

Sector wise, the previous managers found lots of opportunities in financials and industrials companies, although the fund has typically been well diversified across sectors.

Changes to the fund in the past 12 months include investments in Indian business Astra Microwave Products and Shenzhen Inovance Technology, a leading manufacturer of automation products in China. An investment was also made in Samsung Fire & Marine Insurance in Korea, a country in which the fund has typically invested less than the benchmark.

We expect further changes to be made in the coming months as the new managers sell some investments in favour of those where they have higher conviction. This could result in the fund's investing more or less than it currently does in certain countries or sectors.

The fund can also use derivatives, which can increase risk.

ESG Integration

Schroders has invested significantly in ESG (Environmental, Social, and Governance) resources and tools in recent years. Investment teams have access to a variety of data sources that have been brought together into a proprietary platform called SustainEx, which allows them to quantify a company’s positive and negative contributions to society.

All Schroders funds were required to pass the firm’s inhouse ESG accreditation process by the end of 2020. All new funds must also be ESG-accredited, and investment teams must reapply for accreditation on an ongoing basis.

This process is managed by the Sustainable Investment team. They sit on the investment desk and are objective in their approach. There is a set list of criteria that funds must meet to become accredited, and the process is substantial – no fund has ever gained accreditation on the first attempt. Fund managers are also expected to demonstrate improved levels of ESG integration over time.

The Schroders Sustainable Investment team acts as a focal point for ESG, proxy voting, and engagement. When it comes to proxy voting, Schroders has structured policies in place and is transparent on the reasons proposals have been voted against. On the ESG engagement side, the firm’s activities and outcomes are monitored, tracked and reported in its quarterly Sustainable Investment reports. There are also a range of ESG-related insight and thought leadership articles available on the firm’s website.

Although the fund managers incorporate ESG factors into their analysis, this isn’t a sustainable fund.

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 that Schroders is dedicated to investing in this part of the world and supporting the teams that invest there.

We believe that incentivisation for Schroders’ fund managers and analysts is focused on longer-term performance potential and is therefore aligned with their investors. Asian and emerging markets investors are based all around the world and are an important resource for the group’s range of Asian funds.

In February 2026, Schroders announced that it would be acquired by US asset management company Nuveen. No changes to the investment team are expected at this stage, but we’ll monitor any developments and potential impact on the fund.

Cost

The fund has an annual ongoing charge of 0.95%, but we’ve secured HL clients an ongoing saving of 0.24%. This means that you’ll pay a net ongoing charge of 0.71%.

The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP. The HL platform fee of up to 0.35% per year also applies, apart from in the Junior ISA, where there is no platform fee.

Performance

Since the fund launched in 2012, it has generated returns of 179.92%*. This is strong growth but trails the 212.95% returns of the MSCI AC Asia ex Japan SMID benchmark. Past performance isn’t a guide to the future. Investors should also note that this performance is attributable to the fund’s previous managers.

Over the 12 months to the end of July 2026 the fund returned 11.47%, which lagged the 17.79% gains of the benchmark. The fund's investing less than the benchmark in technology companies impacted performance, as the sector performed strongly. Many smaller companies in Asia, particularly in Taiwan and South Korea, have seen demand for their products rise as spending on artificial intelligence (AI) related hardware increased.

The Schroder ISF Global Emerging Markets Smaller Companies fund is also managed by Riveroll and Memon. Since Riveroll became manager at the end of 2020, returns of 68.62% are ahead of the MSCI Emerging Markets Small Cap index, which gained 64.53%. Our analysis shows that although the fund has outperformed, it has tended to experience greater volatility than the broader market. We think it’s reasonable to expect that Asian Discovery might perform in a similar way in future. Of course, there are no guarantees.