Schroder AsiaPacific 06 November 2018
Disclosure – Non-Independent Marketing Communication
This is a non-independent marketing communication commissioned by Schroder AsiaPacific. 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.
Schroder AsiaPacific aims to generate long-term capital growth from a portfolio of emerging Asian equities.
The trust has performed well in recent years, with top quintile returns over three and five-year periods; this has been helped by exposure to the technology and consumer discretionary sectors, which the manager, Matthew Dobbs, believes are benefitting from and shaping secular growth trends.
Matthew has run the trust since it was launched in 1995, making him one of the most experienced fund managers in the UK and meaning he has worked through multiple market cycles. He draws on the research of a large team of analysts based on the ground across Asia.
The trust has a dividend yield of 1.5% and has grown its dividend in recent years. The managers caution however that there is no guarantee of it being equalled, or increasing, given the fact that capital growth is the priority and revenue reserves relatively low.
The trust’s discount has traded between 9% and 13% in recent years and currently sits around the middle of that range; the trust has not conducted buybacks since 2016 although the board does have the authority.
The management of this trust is a key advantage in our view. Matthew Dobbs has been at the helm of the trust through the 1998 Asian crisis, the dotcom bubble, the “great moderation” and the 2007 financial crisis – amongst everything else - so knows the market as well as anybody. On top of this, he can draw on the work of almost forty specialist analysts based on the ground in the region, giving him great coverage as well as on-the-ground expertise. It is no surprise that the trust has done well out of secular trends in the technology and consumer sectors, the identification of which can only be made easier through local knowledge. The discount is wide in absolute terms, especially with reference to the wider investment trust universe.
|A highly experienced manager well-resourced in the region
|Taking an active approach can lead to underperformance for extended periods
|A track record of performing well in rising and falling markets
|There is no immediate catalyst we can see for a re-rating of the discount
|An active approach should increase the chance of long-term outperformance
|This is a risky geography to invest in