If you’re nervous about the UK’s prospects it makes sense to ask where else there are growth opportunities. In our view investors need look no further than Asia and emerging markets.
By 2030 it is estimated that a third of the world’s middle class population will live in Asia. A more prosperous population demands better infrastructure, education, healthcare and financial services. Fast-growing economies should be able to invest in these areas, and companies will spring up to cater for increased demand across a whole host of sectors.
Why invest in this fund?
- Combines two higher-risk areas with enormous growth potential – eastern markets and smaller companies
- A great way to diversify your investments overseas
- Managed by Matthew Dobbs, who has a 20+ year track record investing in Asia
Importantly; small, innovative and entrepreneurial firms can adapt quickly and capitalise on opportunities unexplored by larger firms. This drives development and prosperity further. Wages and disposable income continue to rise, so the cycle can continue.
The universe of smaller companies in Asia and emerging markets is vast, and includes some of the most underresearched companies in the world. This presents an ideal hunting ground for investors with the passion and dedication to seek out hidden gems.
The growth potential offered by smaller companies and Asian/emerging markets is an exciting combination, in our view. Of course, smaller companies are higher risk and this is particularly true when they operate in more volatile emerging markets. A long-term outlook is therefore essential.
Matthew Dobbs, manager of the Schroder Small Cap Discovery fund, searches for exciting smaller businesses exposed to higher-growth regions of the world. He has the flexibility to invest outside Asia and emerging economies, as long as the business derives a large proportion of its revenue from the region.
A focus on smaller companies differentiates the fund from many peers investing in these markets. The larger companies universe is dominated by utilities, telecoms, energy and financial firms. Smaller companies offer exposure to the consumer, industrials, and healthcare sectors. This is where the manager sees the greatest opportunity to benefit from the east’s burgeoning middle class. He prefers investing in businesses with high-quality management teams and good standards of corporate governance.
Our analysis shows Matthew Dobbs’ astute stock-picking has added significant value for investors over the longer term. He has invested in Asian companies for more than 20 years and since the launch of this fund in March 2012 it has returned 79.9% against 45.5% for the FTSE Emerging Index*. Remember past performance is no guide to future returns.
The intersection between Asian and emerging markets and smaller companies is one full of potential, though clearly this comes with greater risks. We think this fund provides an excellent way for long-term investors to gain exposure.
Top ten country exposures
Past performance is not a guide to future returns Source: Schroders, as at 31/07/17
|Annual Percentage Growth|
| Aug 12 -
| Aug 13 -
| Aug 14 -
| Aug 15 -
| Aug 16 -
|Schroder Small Cap Discovery||14.4||27.2||-9.0||27.5||12.9|
Past performance is not a guide to future returns. *Source: Lipper IM to 31/08/17Prefer to invest at home? Heather Ferguson reviews the UK-focused Jupiter Income Trust
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