Stewart Investors Asia Pacific Leaders: August 2025 fund update

• David Gait and Sashi Reddy are seasoned investors with a long-term approach

• We like their focus on stewardship and high-quality companies

• The managers have a high-conviction investment approach

• This fund does not currently feature on the Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The Stewart Investors Asia Pacific Leaders fund aims to grow your investment over the long term by investing in high quality companies that mainly operate in the Asia Pacific region such as India, China and South Korea. Unlike the fund’s benchmark and most of their peers, the managers also invest in Japanese companies.

We think the fund could be used for broad exposure to Asia or to diversify a global investment portfolio. Investments in emerging markets add risk and the associated volatility should be considered when constructing a long-term investment portfolio.

Manager

David Gait is a seasoned investor and has been lead fund manager since 2016. He joined the company as a graduate in 1997 and has built up a wealth of experience and played a crucial role in developing Stewart Investors’ Asian investment strategies.

Sashi Reddy is deputy manager and joined Stewart Investors in 2007, where he initially offered analysis and research support to portfolio managers, mainly concentrating on Indian companies.

Reddy and Gait receive support from a close-knit team of other fund managers and analysts. Both managers sit on the Stewart Investors Board and manage other funds alongside this one. We believe they can comfortably handle these responsibilities given the overlap in approach and supportive team dynamic.

Process

The investment approach at Stewart Investors has been grounded in the same philosophy since 1988. This philosophy is built on stewardship, where fund managers treat investors' capital as their own and strive to grow wealth over the long term while minimising losses during periods of uncertainty.

‘Quality’ is a broad term in the investment world but for the managers at Stewart Investors it centres around three key pillars: management, franchise, and financials. They hunt for companies with robust financial strength and sustainable growth prospects.

They put great emphasis on the people and culture within businesses, only choosing to invest in those led by management teams they trust and deem to have integrity. Many of the companies they own still have a degree of founding family ownership.

The team focus on the prospects of individual companies rather than making decisions based on wider economic conditions. The investment process results in a concentrated fund of between 30-60 companies, with the fund currently around the middle of that range. The high conviction approach means each company can have a significant impact on performance, although it’s also higher risk.

As the word ‘leaders’ in the fund name suggests, large and medium-sized companies are the focus with companies typically requiring a market capitalisation of at least $1bn.

The fund currently has a lot invested in India and China with the two countries making up just over half of the fund. The 35% allocation to India is much higher than in the benchmark. Whilst the fund’s benchmark has no investments in Japan, the managers have found a number of high-quality companies listed there that carry out most of their business within Asia. To invest more in Japan and provide additional flexibility the fund is in the IA Specialist sector, although the amount of the fund invested in Japan has been decreasing. The fund had 4.43% invested in Japanese companies in June 2025, compared to 12.42% in June 2023.

When making investments, the managers adopt a long-term perspective and are prepared to be patient. However there have been changes to the fund over the past 12 months. The managers found new opportunities in China and invested in SF Holding, a leading logistics company, as well as the e-commerce platform Alibaba and online travel company Trip.com. These were all purchased after the managers saw improvements in the companies’ governance – a key part of the ‘quality’ investment approach. Some investments were also sold, including India food and beverage supplier Tata Consumer Products and Korean conglomerate Samsung C&T.

Culture

We think the culture and philosophy that has evolved at the group over the years is attractive. The team doesn't put personal gain ahead of its investors and they look for companies that treat their customers in a similar way. It also places emphasis on recruiting and maintaining great people. Every manager and analyst advocates the team's overriding philosophy.

Stewart Investors forms part of First Sentier Investments, which was acquired by Mitsubishi UFJ, a Japanese bank, in 2019. Takeovers can sometimes lead to disruption and corporate change, though positively Stewart Investors remains an independent investment team.

ESG Integration

For the team at Stewart Investors, ESG considerations are much more than a label or box to be ticked. Taking these factors into account is a natural extension of the same investment process they’ve used for decades. The team’s philosophy is founded on stewardship – when they make an investment, they see themselves as part-owners of the business and want to make sure it’s run in a way that’ll benefit all shareholders.

ESG issues form a core part of this. For example, they don’t like companies that make reckless decisions in the pursuit of short-term gains, rather than focusing on longer term, more sustainable growth. A business shouldn’t exploit its workforce, take advantage of tax loopholes, or skirt around industry legislation. Importantly, it should cause little, if any, harm to the environment around it. Stewart Investors has made a firm-wide commitment not to invest in companies whose primary business is to make cigarettes (or other tobacco products), or controversial weapons.

The team also engages closely with company management. It helps them make sure management remain on track with sustainability initiatives and means they can encourage a change in behaviour if required. If they don’t think a business meets their standards, or is doing enough to address a problem, they won’t invest. The firm produces an annual Responsible Investment report, and a Stewardship report. These reports outline the firm’s voting record, provide engagement updates and case studies, and present other ESG-focused research.

However, under the FCA’s Sustainable Disclosure Requirements (SDR), this fund does not have a label. This means that the fund name changed from Stewart Investors Asia Pacific Leaders Sustainability Fund to Stewart Investors Asia Pacific Leaders Fund on 28/11/2024. The team at Stewart haven’t changed their investment approach and continue to consider social and environmental factors when assessing companies.

Cost

This fund has an ongoing annual charge of 0.85%, but we've secured HL clients an ongoing saving of 0.05%. This means you pay a net ongoing charge of 0.80%. 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 0.45% per year also applies, except in the HL Junior ISA, where no platform fee applies.

Performance

Gait has built an impressive track record over his career across a number of Asian funds. Since he was appointed lead manager of this fund in 2016 it’s returned 77.19%*, although this is behind the MSCI AC Asia Pacific ex Japan index which has grown 105.93%. As always, past performance isn’t a guide to the future.

The managers’ focus on quality companies and a more conservative investment style means the fund has tended to hold up better when the stock market has fallen but hasn’t kept pace when markets rise. This has not been the case more recently though.

Over the past 12 months, the fund returned -5.21% versus 15.29% for the index. The managers look at the prospects of each individual company rather than paying attention to a company’s position in the benchmark. As such, the fund tends to be invested quite differently to its benchmark and performance can often be quite different too, especially over shorter time periods.

Over the last 12 months, the fund has had more invested in India and less in China than the index. This was a headwind to performance over the past year as the Chinese stock market grew strongly while the Indian market lost value. Parts of the Chinese market that don’t meet the managers’ ‘quality’ criteria, such as state-owned banks, were particularly strong. This was an additional detractor to performance.

Some investments chosen by the managers also disappointed. Korean technology company Samsung Electronics and Japanese personal care business Unicharm both detracted from performance.

There were some positives though. Investments in regional banks OCBC in Singapore, HDFC in India and Kasikornbank in Thailand were all positive for the fund. A recent investment in South Korean internet company Naver also helped performance.