Fund Profile

Disclaimer

Disclosure – Non-Independent Marketing Communication

This is a non-independent marketing communication commissioned by Pacific Assets. 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
PAC offers risk-managed exposure to Asia’s exciting growth opportunities…
Overview

Pacific Assets’ (PAC) managers David Gait and Douglas Ledingham look to allocate capital for the long term to the best people and businesses in the Asian region with this relatively concentrated equities trust. The managers have a strong focus on risk, which they consider to be the permanent loss of capital. To mitigate this, the managers look for companies with quality and sustainability characteristics, such as highly regarded management teams with integrity, and operating cash-generative, resilient businesses with solid balance sheets (see Portfolio).

Their approach is purely bottom-up, meaning stocks are bought with no consideration of their weight in the benchmark. This can create a portfolio that is significantly different from peers. At present, the managers have a large allocation to India and very little in China. This reflects the managers’ view of a highly entrepreneurial Indian market and the influence of state ownership in China.

This positioning has led to strong Performance over five years, with PAC significantly ahead of peers and its formal benchmark. Much of the positive relative performance is expected to come in falling markets due to the absolute return mindset. The result of this can be seen in PAC’s calendar year returns, which have been positive in nine of the past ten calendar years, including 2024 to date, versus the market’s five positive years.

Despite the strong performance, the trust remains at a wide Discount to NAV. This has notably widened over the short term as the NAV has gone up, though shares have not kept up. The first buyback in many years occurred in September 2024.

Analyst's View

We believe PAC offers investors a truly unique exposure to the Asia Pacific asset class. The managers’ focus on absolute returns and their success in achieving this is multiple years, which means that the trust offers sleep-at-night, buy-and-hold exposure to Asia in our opinion (see Portfolio).

This is a region of the world economy that has considerable growth trends, with significant long-term opportunities, though the potential volatility has arguably put investors off. However, PAC could be a solution to this due to the managers’ very long-term time horizon, and track record of successfully navigating challenging markets. Furthermore, their conservative approach to capital allocation, both in being highly selective with the management teams they deem of high enough quality and both companies they hold, as well as the trust itself typically having net cash, should also help dampen the potential volatility (see Performance).

Despite the managers delivering an impressive long-term track record, the trust’s shares are trading at a wide Discount. This has widened recently which we believe could make for an attractive entry point. The board has also begun share buybacks, having previously been hesitant. Whilst the scale of the programme has not been announced, this will be NAV accretive at these levels.

Bull

  • Long-term outperformance of markets, particularly in challenging periods
  • Risk-controlled approach offers sleep-at-night exposure
  • Trading at a wide discount which could prove an attractive entry point

Bear

  • Conservative approach may mean underperformance in rising markets
  • Large allocation to India could struggle if market experiences slowdown
  • Charges are higher than peer group average
Continue to Portfolio

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