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Schroder Asia Pacific Fund: September 2021 update

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

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, Taiwan and South Korea. 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 and provide exposure to Asian markets.

When investing in closed-ended funds you 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 of the trust, 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 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, 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 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 trust is currently 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 trust 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 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.

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

The trust's ongoing charge is 0.90%. Investors should refer to the latest annual reports and accounts and Key Investor Information 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.

Investors should refer to the latest annual reports and accounts and Key Information Document for details of the risks and charging structure.

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, and doesn’t use gearing, though a similar investment process is used on both this and the Asia Pacific Fund. As always, past performance is not a guide to future returns.

Since taking over the Asia Pacific Fund, it hasn’t performed as well as its peers in the AIC Asia Pacific sector, though this is over a short timeframe. The trust’s discount has widened over this time, which has held back returns in share price terms. Some Chinese companies including Alibaba, Tencent and Ping An Insurance have also been weaker.

Patient investors have been rewarded with good long-term returns. 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 and this is a volatile area in which to invest.

Annual percentage growth
Aug 16 -
Aug 17
Aug 17 -
Aug 18
Aug 18 -
Aug 19
Aug 19 -
Aug 20
Aug 20 -
Aug 21
Schroder Asia Pacific Fund 31.9% 3.4% 0.7% 15.6% 24.4%
AIC Investment Trust - Asia Pacific 26.7% 5.4% 4.2% 11.4% 32.9%

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

Find out more about Schroder Asia Pacific Fund including charges

View Schroder Asia Pacific Fund Key Information Document


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.

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