This month we turn to funds in the IA Asia Pacific sectors to review which funds with less than a three-year track record might be worthy of our attention.
The fact that none of the funds in the Asia Pacific waiting room include Japanese equities in their stock universe reflects the continued lack of appetite for Far Eastern portfolios. There are seven funds to see in this month’s waiting room. It is not surprising the new funds launched over the past three years represent a 10 per cent increase in sector numbers – but the fact only one launch was an income fund does raise eyebrows.
The first consideration when analysing a fund in this sector is its weighting to Australia and other more developed markets. The choice is important as it will dictate short to medium-term performance.
Aberdeen Asia Pacific Enhanced Index fund
First up in the waiting room is the Aberdeen Asia Pacific Enhanced Index fund, which, as the name suggests, operates a “passive plus” style of investing. Aberdeen has long been associated with active management in the Asia Pacific region and Hugh Young, its veteran manager, is responsible for running a significant amount of assets.
This is not a straightforward index tracker holding every name in the MSCI AC Asia Pacific ex Japan index but rather an approach that relies upon quantitative instead of fundamental research.
The quant team is looking to construct a better index to achieve outperformance, perhaps more commonly referred to as smart beta. The fund launched a year ago and celebrates its first anniversary with assets under management of £172m. The fund has 24.8 per cent invested in China, 20.9 per cent in Australia and 14 per cent in Korea among its 445 holdings.
BlackRock Asia Special Situations fund
BlackRock Asia Special Situations was launched by current managers Andrew Swan and Emily Dong in April 2014.
The fund looks to mirror the offshore BGF Asian Growth Leaders fund, which the pair launched in 2012. The idea is to identify and invest in companies that could become the leaders of the future, regardless of their current benchmark weighting. This results in a high conviction portfolio, with the managers aiming to invest in 30 to 40 companies with a clear bias towards mid-cap stocks. This fund is clearly looking to harness the faster economic growth of the region and currently has no exposure to Australia.
The current factsheet shows overweights in utilities, materials and energy sectors versus underweights in technology and financials.
The fund has around £50m in assets today but this is likely to change if the managers can continue their outperformance since inception and promote their franchise in this space.
Jupiter Asian Income fund
The final newcomer is hard to ignore as the only new launch targeting income for the fund buyer.
Professional buyers will be familiar with Jason Pidcock and his reputation in building an Asian income fund for his previous employers. Pidcock resigned from Newton in late 2015 to join Jupiter and launch an apparent replica of his previous portfolio, the Jupiter Asian Income fund. The current running yield is stated on the factsheet at 3.9 per cent with a current weighting in Australia of 32.3 per cent along with 14 per cent in Hong Kong and 12.2 per cent in Taiwan.
With a bias towards more developed markets, this provides some defensive characteristics to the portfolio. The sector weightings are currently dominated by 34.3 per cent in financials, 20.2 per cent in industrials and 10.4 per cent in technology stocks.
John Husselbee is head of multi-asset at Liontrust Asset Management