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Schroder Asia Pacific - July 2020 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
  • We rate Matthew Dobbs highly for his experience and track record of investing in Asia
  • He has 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

How it fits in a portfolio

This trust aims to provide growth by investing in larger companies across Asia, based in countries such as China, Hong Kong, Taiwan and South Korea. It could fit a broader investment portfolio that can have some exposure to a more adventurous 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 key exposure to Asian markets.

Manager

Matthew Dobbs has been the lead manager of this trust since launch in 1995. He has plenty of experience investing in Asian and emerging markets, and has researched them for three decades. He's also managed an open-ended Asian fund since 2007, which uses the same investment process as this trust and is invested almost identically. The manager also runs another open-ended fund that focuses specifically on smaller Asian and emerging markets businesses.

There are hundreds of companies across Asian markets, so Dobbs has the help of other portfolio managers and a robust team of 37 analysts based across Asia. They help him sift through the market and uncover what they believe to be the most promising opportunities.

We think Dobbs is knowledgeable and skilled enough to make decisions in his own right, but it's encouraging that he works closely with Schroders' wider group of analysts and receives ideas and insight from them. We believe he is passionate about fund management and cares about investor outcomes.

Process

The manager aims to spot Asian companies with exciting potential, before they're noticed by other investors. He believes he's able to do this thanks to the in-depth analysis carried out by his well-resourced investment team.

Dobbs works 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 manager only invests if a company's shares can be bought at a price that doesn't yet reflect its longer-term earnings potential.

At the moment the trust 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 it's currently focused on sectors such as technology, financials and consumer services. Some of the largest investments include Chinese ecommerce businesses Tencent and Alibaba, and insurance firms AIA Group and Ping An Insurance Group.

Overall the trust invests in a relatively small number of companies, which means each one could significantly impact performance but this is a higher-risk approach. The ability to use gearing (borrowing to invest) and derivatives also adds risk.

Culture

Schroders is a well-established asset manager with offices based 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.

Dobbs is currently based in London, though he has spent some time living in Asia too. He's spent his entire investing career at Schroders since 1981 and we think he is loyal to both his funds and other team members. He has built a good franchise of Asian and emerging markets funds at Schroders and enjoys making good returns for investors. We also view it as a good thing that the manager's incentivisation is focused on longer-term performance.

Cost

The trust's ongoing charge is 0.93%. 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.

Performance

Dobbs has an excellent long-term track record. Over the past decade his Schroder Asia Pacific Fund has grown 196.0%* compared with 120.1% for the broader Asian stock market, as measured by the FTSE Asia Pacific ex Japan Index. Please remember past performance isn't a guide to future returns.

We think the manager has added value over the longer term by investing in companies that have gone on to perform well, no matter their size, or what sector or country they're in. In recent years a focus on technology companies, and those that are seen to have higher growth prospects, have helped performance.

Like most portfolios investing in Asia, it's been a volatile year so far for the Schroder Asia Pacific Fund due to the turmoil caused by the coronavirus crisis. The trust fell sharply from mid-February to mid-March, though it has since recovered most of its previous losses. We think the Asian region offers strong long-term growth potential, but further volatility shouldn't be ruled out, especially while the virus continues to create uncertainty and impact the way businesses are run.

Schroder Asia Pacific - performance since launch

Past performance is not a guide to the future. Source: Lipper IM* to 30/06/2020.

Annual percentage growth
June 15 -
June 16
June 16 -
June 17
June 17 -
June 18
June 18 -
June 19
June 19 -
June 20
Schroder Asia Pacific Fund PLC 8.6% 41.0% 11.9% 3.3% 6.6%
FTSE Asia Pacific ex Japan 6.8% 27.7% 7.0% 5.1% 2.8%

Past performance is not a guide to the future. Source: Lipper IM to 30/06/2020.

Find out more about the Schroder Asia Pacific Fund Investment Trust including charges

Schroder Asia Pacific Fund Key Investor Information


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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