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A best ideas Asia Pacific ex Japan equity fund where the managers have a focus upon earnings, sustainable returns and solid valuation support. The approach is flexible and benefits from the experience of the managers, together with the breadth of the research resource. Within its sector, the fund features in our 'Larger-Cap, Blend' category.
The fund’s KIID Synthetic Risk and Reward Indicator (SRRI) is 6. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 6 means the fund’s historic volatility is between 15% and 25%.
The fund’s risk score of 6 is consistent with like-minded, actively- managed Asian funds. The managers are willing to tolerate short-term drawdowns when they see value emerging and by their own admission, tend to buy early when markets are fearful. The volatility is broadly in line with the benchmark and marginally above that of the peer group. Different share classes could have differing SRRI scores.
The fund is managed by Richard Sennitt and Abbas Barkhordar. Mr Sennitt has been at Schroders for over 20 years and has managed the Schroder Asian Income fund since 2006. He has been involved with the Schroder Asian Alpha Plus fund since its launch in 2007 and was appointed lead manager at the end of March 2021. Mr Barkhordar joined Schroders in 2007 and has worked closely with Mr Sennitt for over a decade. Messrs Sennitt and Barkhordar report to Robin Parbrook, an extremely experienced Asian equity practitioner.
The managers believe that the Asian regional markets are highly inefficient and that an intensive proprietary research process can provide a significant information advantage. They also believe that the momentum in stocks that typifies the Asian markets can also be exploited if correctly understood.
The portfolio typically features between 50-70 holdings, all of which are expected to contribute to the overall return. Individual holdings are a function of conviction, but there is a limit of 5% overweight versus the index. The portfolio turnover is always a function of opportunity. The active share is constantly above 80% and the portfolio tends to be ‘anti-momentum’ by the nature of its construction. Cash is not used as a tactical investment tool and is generally kept below 5%.
The process is very research-intensive, with the managers relying upon the in-house research capability of Schroders, as well as their extensive network of contacts and sell-side research. The focus is firmly upon companies with visible earnings, sustainable returns and solid valuation support. The research is driven by an extensive programme of company meetings, which focus upon the future management strategy, the competitive position of the company, barriers to entry and how shareholder wealth will be created. The analysts use standardised models to generate cashflow and earnings estimates to evaluate the company’s ability to meet strategic goals. Stocks are ranked from 1-4, with 1 a strong buy. Stock grades and other analyst output are stored in the firm’s in-house global research portal Nexus, a modularised platform, which allows integration and interconnection of many investor focused applications. The managers typically source ideas from stocks ranked 1 and 2. They are, however, always aware of the degree of momentum in Asian markets and weaker ranked stocks may also be considered where value is perceived. The managers also utilise their extensive network of contacts, alongside selective use of sell-side research, to identify interesting investment ideas. While the investment view is bottom-up in essence, country allocation is considered within a top-down overlay. This view is formed with help from Schroders’ central economics team, a proprietary country allocation model and his own perspectives on politics, demographics and long-term growth. As part of the buy and sell discipline, they take into account analysts’ stock rankings and price targets.
Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.
At The Adviser Centre, our primary aim is to support financial professionals in their fund selection and suitability work through independently-minded research, borne of decades of industry experience. Our process is framed by the fundamental concepts of “quality”, “value” and “utility”, through which we answer the key questions of why to invest in a fund, how it is likely to behave and how it can be deployed.
The Adviser Centre team members are some of the most experienced in the fund research industry. We can always look forward to robust and constructive discussions and we have great respect for their views and perspectives, which, given the breadth of their fund and market knowledge, come from an extremely well-informed position.
We have known and worked with the team for several years and we value their experience and the insights they provide to our own investment process. The service differentiates itself by its more focused nature and the information on their factsheets is useful in emphasising a fund’s key mandate, exposure and style biases, helping to explain the risk/return journey that our customers can expect.
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