Fund Profile

Schroder Asian Total Return 14 June 2023

Disclaimer

This is a non-independent marketing communication commissioned by Schroder Investment Management. 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 Chinese underweight has set it apart from peers…
Overview

Schroder Asian Total Return (LON:ATR) is a unique offering in the AIC Asia Pacific sector which looks to capitalise on the long-term growth of Asia, through a portfolio of around 50 stocks. Co-managers Robin Parbrook and King Fuei Lee are benchmark agnostic when it comes to identifying their holdings and look for quality companies from across the region, including in Australasia, which have the ability to deliver strong long-term returns. This is complemented by the use of hedging strategies, which the managers will look to use to reduce specific exposures, if they feel there is a strategic or tactical opportunity, and limit downside risk to the portfolio.

While many managers have turned positive on China in recent months, Robin and King Fuei have actually increased their underweight position (see Portfolio). They believe the market is expecting too much from reopening and that share prices in those stocks set to benefit have gone too far. They also don’t believe the internet names will be the winners from this, so have stayed away. This has given the portfolio a different exposure compared to many peers in the sector.

Historically, the trust has either traded at a premium or narrow discount in contrast to the peer group, which has been at a persistent discount. 2022 saw a rare period of underperformance for the trust (see Performance) but the long-term returns remain strong and have been delivered in a risk-controlled manner. The trust has outperformed both the reference index and sector average over five years and has done so with a lower beta.

Analyst's View

We believe ATR offers two standout features for investors. Firstly, there is the structure, which offers investors high-quality stock selection within the region, alongside the hedging strategies which should help mitigate the more excessive risk factors that Asia can often present (see Portfolio). Secondly, the trust has moved considerably underweight China as a result of the managers’ scepticism over the market reaction to the reopening of trade and structural challenges facing the market. For investors who are particularly cautious on China, this could offer a compelling opportunity.

The trust has shown it is able to deliver strong long-term returns from the high growth potential of the region by capturing the secular growth trends. This, combined with being underweight to China, sets it apart from the AIC Asia Pacific peer group. On top of this, the hedging strategies offer some volatility management, which we think is especially valuable in a region that can be volatile (see Performance). The open-ended equivalent of ATR is soft closed, meaning this is one of the few vehicles through which investors can gain access to this unique strategy.

Furthermore, ATR fell to a Discount in 2022. The trust is one of the few in the peer group that has traded at a premium over the past few years, however the current 5.7% discount in our view offers a potential opportunity.

Bull

  • Managers have a strong long-term track record of delivering alpha
  • Offers an approach that manages volatility from a potentially volatile region
  • Trust is currently trading at a rare discount

Bear

  • Trust could underperform if China continues to rally
  • Trust levies a performance fee which some investors don't like, though we believe aligns incentives better between manager and shareholders
  • Large technology weight is exposed to global cycle
Continue to Portfolio
2024 Kepler Growth Rated Fund

This trust has been awarded a rating by Kepler Trust Intelligence for growth... Find out more

Fund History

17 May 2024 Foot on the brakes
The US will struggle to stop China…
18 Mar 2024 Results analysis: Schroder Asian Total Return
Good stock selection has driven another year of outperformance for ATR…
17 Jan 2024 Top of the Pops
We reveal the winners of our investment trust ratings for 2024…
15 Nov 2023 Why it pays to be active in Asia
ATR’s highly active approach has delivered long-term outperformance for shareholders…
15 Nov 2023 The Asian century
Failing to invest in Asia means omitting half the global economy from your portfolio…
25 Aug 2023 Is China a value play?
Almost all Asia managers are underweight the world’s second-largest economy...
11 Aug 2023 Calling emerging markets
The rapid rate of smartphone adoption in emerging markets has improved lives and presents interesting opportunities to investors...
14 Jul 2023 Asian investment trusts: an abundance of opportunity
Exploring investors’ renewed enthusiasm for Asian equity...
05 Jul 2023 Silk Road Strife
The Asian narrative has been dominated by the India vs China debate, but on which side of the line have investment trust managers fallen?
30 Jun 2023 High end China
Several managers are investing in higher-end consumer growth in the world’s second-largest economy…
29 Jun 2023 Bear in a China Shop
All the speakers at our emerging markets-focussed event last week see battered valuations in emerging markets – with the exception of the largest of them all – as a big opportunity…
14 Jun 2023 Fund Analysis
ATR’s Chinese underweight has set it apart from peers…
20 Jun 2023 Schroder Asian Total Return
Robin Parbrook
This webinar is part of our June online event 'Spotlight on emerging markets'
Watch Recording
16 Mar 2023 Diversity matters
We examine the effect of blending multiple funds within your regional allocation and find that – while the culture wars may rumble on elsewhere – the benefits of diversity for investors are unarguable…
11 Jan 2023 Solving the Rubik’s Cube
We reveal the winners of our investment trust ratings for 2023…
16 Dec 2022 Investment Trusts: opportunities in all market conditions
How are current market conditions impacting the Schroders investment trust range?
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...
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...
03 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 markets look toppy, we consider a few equity trusts with different approaches to diversification and risk management...
17 May 2018 Blast off!
As China A-Shares join the global indices, many investors remain structurally underexposed to this exciting region...
05 Mar 2018 Fund Analysis
A unique trust in the Asia Pacific sphere, aiming for long-term growth with a derivative overlay allowing stockpicking to drive returns...
09 Feb 2018 The madding crowd
Recent volatility could be a taste of things to come, so we examine trusts that offer capital protection...
30 Nov 2017 Race ready?
We analyse the outlook for emerging markets and, in particular, the genuine active funds that focus on them…
02 Jun 2017 Finely balanced...
We take a closer look at the Asia Pacific ex Japan sector following a period of improved inflows into the open-ended sector and the recent outperformance of Asian equities...
31 Mar 2017 Bargain or basket case?
As the reality of Donald Trump's administration settles in, we examine the case for emerging markets exposure...
31 Mar 2017 Fund Analysis
A well resourced trust focused on Asian equities with a unique absolute return approach...
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