Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Schroder Asian Total Return. The report has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on the dealing ahead of the dissemination of investment research.

Overview
ATR’s sophisticated strategy is an attractive way to take long-term Asia exposure…
Overview

Schroder Asian Total Return (ATR) applies a sophisticated strategy in order to allow investors to benefit from the growth opportunities in Asian companies while moderating the volatility often seen in the region’s markets. After a highly successful open-ended vehicle was soft-closed in 2010 it is the only option for new investors looking to access this strategy.

As we discuss under Performance, over the long-term the trust has delivered exactly the sort of return profile it is intended to. There has been significant alpha delivered versus the benchmark, with the trust having a tendency to perform well in falling markets. To some extent this reflects stock selection and the impact of the quality and valuation factors the managers look for. Another factor is the hedging strategy which sees the managers apply short positions in country and regional indices based on battle-tested quant models looking at economies from the top-down and companies from the bottom-up.

The strategy is the brainchild of managers Robin Parbrook and King Fuei Lee, who have worked together for over 20 years and run the strategy since 2007 (ATR launched in 2013). They draw on the work of a team of 39 analysts covering the region to identify the companies they think will generate the best absolute returns over the medium to long-term, aiming to take a longer-term view than the market. The portfolio tends to be tilted towards quality stocks where the managers believe the best long-term opportunities are. Following a poor six months for markets and for the trust the Discount has widened out considerably.

Kepler View

ATR has a number of attractions for the long-term investor. The track record of alpha generation is good. Meanwhile the focus on the long-term, on low turnover and on absolute returns are factors which could support alpha generation in future. Additionally, the hedging strategy should give some confidence that investors might be protected in some of the worst periods for markets. That said, the trust does have a quality / growth bias which has hurt it in recent months and offset any benefit from the hedges. If the current inflationary environment develops into a recession then short-term headwinds may remain strong.

In buying at the moment, however, investors can benefit from a rare discount which is wide relative to its history. In our view there is a better than average chance of the share price rating returning to its usual premium. In addition to the strong track record of the trust and the attractions of the strategy itself, there is technical support from the fact that the open-ended vehicle is soft-closed, which should direct any inflows to ATR’s shares. We acknowledge it may take some time for the current market environment to shift back to one conducive to the managers’ style. However, Robin and King Fuei are more optimistic than some, and think valuations of Asian markets are already attractive relative to history with the near-term outlook – over the next 12 months – looking good for positive returns. If they are right then we think the rating could recover quite swiftly.

Bull

  • The strategy has an attractive track record of limited losses in falling markets and strong gains in rising markets
  • A highly active approach which is more likely to lead to alpha generation
  • The defensive elements to the approach could appeal in uncertain times

Bear

  • Macro models can be confounded by one-off events and policymakers
  • Some will dislike the performance fee
  • Using gearing in a countercyclical fashion can magnify short-term losses
Continue to Portfolio

Fund History

19 Jul 2022 Fund Analysis
ATR’s sophisticated strategy is an attractive way to take long-term Asia exposure…
20 Jan 2021 Kepler's top-rated investment trusts for 2021
We update our annual quantitative ratings for investment trusts…
15 Apr 2020 Fund Analysis
ATR is the standout trust in its sector for both absolute and risk-adjusted returns, now trading on a significant discount...
24 Mar 2020 First in, first out?
We ask whether the brave should be raising their allocation to Asia...
19 Feb 2020 Dialling down the noise
Schroder Asian Total Return Investment Company takes a unique approach to Asian markets which allows the managers to focus on targeted stock selection and effectively cancel out market noise through the selective use of hedging...
03 Jul 2019 Push-me pull-you
Two contrasting influences are dominating the outlook for Asian markets - we analyse them and how Asia trusts are positioning their portfolios in response...
02 Jul 2019 Fund Analysis
Schroder Asian Total Return seeks to limit the volatility of Asian stock markets while capturing the best stocks...
24 Dec 2018 Why did the chicken cross the road?
Because he was so bored of reading newspapers devoted entirely to Brexit he was hoping he’d be hit by a truck.
08 Aug 2018 Feeling giddy?
As valuations continue to soar, we consider a few equity trusts with different approaches to diversification and risk management...
16 May 2018 Blast off!
Many institutional investors are structurally underexposed to one of the fastest growing parts of the world even as China A-Shares join the global indices...
28 Feb 2018 Gimme shelter
As the bear market for bonds and corresponding volatility in equities escalates we examine trusts that offer excellent capital protection..
27 Feb 2018 Fund Analysis
A unique trust in the Asia Pacific sphere, aiming for long-term growth with a derivative overlay which allows stockpicking to drive returns...
27 Sep 2017 A risk aware route to the best that Asian equities have to offer
21 Mar 2017 Fund Analysis
21 Mar 2017 Eyes on the price...
As the reality of Donald Trump's administration settles in and market momentum continues to grow, we examine the case for emerging markets exposure...
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