First State overhauls Pacific Assets

David Gait, a senior portfolio manager within First State’s global emerging markets and Asia Pacific ex-Japan team, has completely revamped the Pacific Assets trust.

David Gait
David Gait

Gait inherited the £129.25m trust from F&C Investments in July and has since sold 45 of its 50 holdings.

“The strategy that we are running is an Asian sustainability strategy, although the word sustainability can be misleading because it is not a green or ethical fund,” says Gait.

Instead, Gait and his team focus on companies with high-quality management teams that aim to take advantages of the changes happening in the region. Gait, who manages both the First State Asia Pacific Sustainability fund and the First State Indian Subcontinent fund, has adopted the same investment philosopy implemented in other First State funds.

The approach includes a strong focus on absolute returns, capital preservation and capital growth. Portfolios also often differ significantly from the benchmark.

The trust now owns several gas but no coal and oil companies, owing to the sustainability remit

Within the Pacific Assets trust, for example, the top 10 stocks account for up to 35-40% of the portfolio but for less than 5% of the index.

More specific information on individual holdings, sectors and countries is not available to the public yet owing to rules of disclosure of information.

On a sector level, the trust now owns several gas but no coal and oil companies, owing to the sustainability remit. Gait says this was not a call on a particular sector or country but a decision based on valuations and the management teams of individual companies.

The trust also owns a number of consumer staple companies, which Gait admits have become “quite fashionable” among global emerging markets managers. (article continues below)

Within the sector, Gait targets companies operating in the broad mass market. An Indian manufacturer of herbal toothpaste, for example, is among his new additions. However, Gait is less interested in consumer staple companies producing high-end cars and fashion goods.

He continues to find other compelling investment opportunities within companies that provide water, access to financial products and mobile phones.

First State does not currently plan to introduce any new features to the trust, such as buy-backs or gearing.

The Pacific Assets trust is First State’s second investment trust after the Scottish Oriental Smaller Companies trust. First State says although it is not actively seeking new institutional mandates at this time, the closed-ended nature of investment trusts make them an attractive structure.

At F&C, Peter Dalgliesh used to manage the Pacific Assets Trust. Dalgliesh, who took over the management in October 2006, ran the trust with an active strategy and a growth bias, opportunistically searching for investments in the Asia Pacific region and the Indian sub-continent, excluding Japan and Australasia.

The loss of the investment trust mandate was the second for F&C this year, after Edinburgh Partners assumed management of the £283m Foreign & Colonial Eurotrust, which is now called European Investment Trust, in February.

F&C has also been served notice from the board of the F&C Commercial Property Trust ahead of a proposed merger with Ignis Investment’s UK Commercial Property Trust. It was given a six-month notice period from the board of the trust, which recommended the merger.