We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

Schroder Asia Pacific Fund: July 2022 update

Lead Investment Analyst Kate Marshall shares our analysis on the manager, process, culture, ESG integration, cost and performance of the Schroder Asia Pacific Fund plc.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

  • This investment trust offers a way to access long-term growth potential from across the Asia Pacific region
  • Richard Sennitt and Abbas Barkhordar took over the trust's management at the end of March 2021
  • They have the support of a robust team of analysts based across the region to uncover some of the most exciting opportunities

How it fits in a portfolio

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

Investors in closed-ended funds should be aware the trust can trade at a discount or premium to Net Asset Value (NAV).

Manager

Matthew Dobbs stepped down as manager of this trust on 31 March 2021. His long-term colleague Richard Sennitt took over as lead manager, with support from co-manager Abbas Barkhordar.

Like Dobbs, 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 this trust, so he knows it well. He has also managed the open-ended Schroder Asian Income Fund since 2006, as well as a few other Asian income portfolios that are run similarly. In addition to taking over the Asia Pacific Fund, he assumed responsibility for the Schroder Asian Alpha Plus Fund, an open-ended fund 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. He also has a background in broader economic analysis.

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 trust. 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.

The managers tend to invest more in growth-focused companies but will also invest in value-orientated companies depending on the opportunities available. This could include businesses or sectors that are more sensitive to changes in the economy, or those whose share prices look "cheap" compared with their growth potential.

For example, towards the end of 2020, the managers reduced exposure to growth-focused holdings and added to the real estate and financial sectors. More recently, the managers have tilted back slightly more towards growth, following a weaker period for this style and the opportunity to invest at more attractive share prices.

In terms of countries, around 20% of the fund is invested in China, which compares with almost 40% for the fund's benchmark. The managers are mindful of the political and economic challenges faced by the country, and the headwinds caused by its zero-Covid policy. This could cause issues in terms of logistics, dampen consumption, and more broadly make life less certain for businesses. That said, the managers have recently added to some investments in China following a weaker period of performance for its market this year. This lower exposure to China is also offset to a degree by investing more in Hong Kong than the benchmark (14.7% vs 7.8%).

Please note the managers can use gearing (borrowing to invest) and derivatives which adds risk.

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.

We believe incentivisation for Schroders fund managers and analysts is focused on longer-term performance potential, and is therefore aligned with their investors. The Asian equities team is based across the UK and Asia, and this remains an important resource for the group's range of Asian funds.

ESG integration

Schroders has invested significantly in ESG (environmental, social and governance) resources in recent years. Each investment desk has access to a variety of data sources that have been brought together into a proprietary platform that allows investment teams to analyse a company's performance on several ESG measures.

ESG issues have always formed part of the Asian team's company analysis as they believe they impact the earnings sustainability of a company. 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.

The team uses the group's proprietary CONTEXT framework. This considers various stakeholders, where risks lie, and how this could impact the business, and analysts score each company on an ESG basis. While the fund integrates ESG analysis, it's not exclusions based. This means the managers are prepared to invest in any sector providing they fully understand the risks around it. For example, will ESG risks impact company earnings? The greater the potential for ESG risks, the less likely the managers will invest in a company or hold a larger position. They hope the overall result is a portfolio of higher-quality companies.

Cost

The trust's ongoing charge is 0.86%. Investors should refer to the latest annual reports and accounts and Key Information Document for details of the risks and charging structure.

If held in a SIPP or ISA the HL platform fee of 0.45% (capped at £200 for a SIPP and £45 for an ISA) per annum also applies. Our platform fee doesn't apply if held in a Fund and Share Account.

Performance

Richard Sennitt has an extensive track record investing in Asia. He has managed the Schroder Asian Income Fund since 2001 – this fund is different as it aims for income and growth, and doesn't use gearing, though a similar investment process is used on both this and the Asia Pacific Fund to find investment opportunities. As always, past performance is not a guide to future returns.

Asian stock markets have faced a tougher time over the past year, partly as China has faced headwinds due to its Covid-induced lockdowns, and this impacted the trust's performance. In addition, while the fund takes a relatively flexible approach, it's generally tilted more towards growth investing. However, rising interest rates and inflation have held back this style so far this year, as they reduce the value of future cashflows. This has dampened the fund's performance.

That said, the trust has held up slightly better than its peers in the AIC Asia Pacific sector over the year to the end of June 2022. The trust's discount has narrowed slightly over this time, though it still stands on a discount of 8.62%, at the time of writing.

Patient investors have been rewarded with good long-term returns, though performance has been volatile at times. We think the Asian region and the trust have long-term growth potential, though there are no guarantees how the trust will perform in future.

Annual percentage growth

Jun 17 – Jun 18 Jun 18 – Jun 19 Jun 19 – Jun 20 Jun 20 – Jun 21 Jun 21 – Jun 22
Schroder Asia Pacific Fund 11.87% 3.31% 6.61% 33.13% -15.36%
AIC Investment Trust - Asia Pacific 10.64% 7.50% 0.62% 44.55% -17.02%

Past performance is not a guide to the future. Source: Lipper IM to 30/06/2022.

FIND OUT MORE ABOUT Schroder Asia Pacific Fund INCLUDING CHARGES

VIEW Schroder Asia Pacific Fund KEY INFORMATION DOCUMENT

Want our latest research sent direct to your inbox?

Our expert research team provide regular updates on a range of investment trusts.

Please correct the following errors before you continue:

    Existing client? Please log in to your account to automatically fill in the details below.

    This site is protected by reCAPTCHA and the Google Privacy Policy and Terms of Service apply.

    Loading

    Your postcode ends:

    Not your postcode? Enter your full address.

    Loading

    Hargreaves Lansdown PLC group companies will usually send you further information by post and/or email about our products and services. If you would prefer not to receive this, please do let us know. We will not sell or trade your personal data.

    Our investment trust research is for investors who understand the risks of investing and that investing in investment trusts isn't right for everyone. Investors should only invest if the trust's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of an investment trust before they invest, and make sure any new investment forms part of a diversified portfolio.

    What did you think of this article?

    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

    Editor's choice – our weekly email

    Sign up to receive the week's top investment stories from Hargreaves Lansdown. Including:

    • Latest comment on economies and markets
    • Expert investment research
    • Financial planning tips
    Sign up

    Related articles

    Category: Markets

    Next week on the stock market

    What to expect from a selection of FTSE 100, FTSE 250 and selected other companies reporting next week.

    Matt Britzman

    12 Aug 2022 4 min read

    Category: Shares

    Earnings season roundup – the key takeaways for investors

    With another earnings season coming to an end, here are some of the key takeaways for investors.

    Matt Britzman and Sophie Lund-Yates

    11 Aug 2022 6 min read

    Category: Shares

    Investing for dividends – what you need to know

    Investing for dividends is one way to make money from shares. But there are a few things to look out for before snapping up a dividend stock.

    Matt Britzman

    10 Aug 2022 6 min read

    Category: Markets

    Next week on the stock market

    What to expect from a selection of FTSE 100, FTSE 250 and selected other companies reporting next week.

    Matt Britzman

    05 Aug 2022 5 min read