Profile: Schroders’ Parbrook invests in China despite “nonsense” from policymakers

Parbrook, Robin_700x450

Schroders’ Robin Parbrook is clearly a man of conviction. As co-manager of the £160m Schroders Asian Total Return Investment Company and the open-ended $2bn (£1.4bn)Schroder International Selection Fund Asian Total Return he puts his money where his mouth is and has half his family’s wealth invested in the two funds.

Parbrook and his co-manager King Fuei Lee assumed control of the Schroders Asian Total Return trust in March 2013 when management was passed from Henderson Global Investors to Schroders following a period of sluggish performance.

Despite a testing environment, the trust’s total returns over one year have beaten the index and the sector. To May 6 the trust’s total return was -1.78 per cent against -11.2 per cent for the Asia Pacific ex Japan Equities sector and -16.11 per cent for the MSCI AC Asia ex Japan index, according to FE data.

Since March 2013 the trust has provided a total return of 9.2 per cent compared with the 2.6 per cent of the index and the -0.3 per cent of the sector.

Launched in 1987, the trust is run in the same way as the Schroder ISF Asian Total Return fund, which Parbrook and Lee have managed since 2007, the key differentiator being that the trust is an absolute return vehicle and has a gearing facility. Currently the trust has 3 per cent gearing, though this has recently been reduced from 8 per cent during the rising market.

There are at present 60 positions in the trust, slightly more than in the open-ended fund, which is unable to hold smaller companies because of its size. Parbrook admits the number of trust holdings is high; typically the managers hold 40 to 60 positions.


“We don’t think about the index,” Parbrook says. “Every stock is one of our best ideas – those with the most upside to fair value. We are geographically driven by where the best ideas are – provided by the Schroders research team – and we don’t hold any more than 5 per cent in any stock. It is a high-risk absolute return fund.”

Parbrook and Lee have worked together for 15 years, having both originally been based in London before moving to Asia.

“I’m more economics and fluff – or history – and King is more economics and stats,” says Parbrook. “King runs the quant models and takes care of the hedging overlays and the Australian stock selection while I do the remainder of the stock selection, although all positions are joint.”

The trust is currently 70 per cent net long as the managers have been buying puts on the main Asian indices for extra protection in the rising market. While the average allocation is 85 per cent net long, Parbrook says they are not “outright bearish”, having been as low as 40 per cent net long in the past.

The bulk of the trust’s allocation is to Hong Kong at 30 per cent, although this includes non-domestic companies such as Hong Kong-listed Chinese manufacturing and industrial firms that sell globally. Examples include electronic goods company Techtronic, a 3.5 per cent position, and conglomerate Jardine, a 3.6 per cent weighting.

Parbrook says: “We invest where we find the best value. Hong Kong is out of favour and stocks are heavily sold off.”

Parbrook has been building up the weighting to China by a couple of per cent to about 15 per cent through China A shares. He has ignored state-owned companies and is dismissive of China’s policymakers. “The main driver of market moves appears to be the nonsense that emanates from central bankers and People’s Republic of China policymakers. As ever, we view this as noise.

“We don’t believe reform is happening in China but we are finding reasonable opportunities there, even though we don’t like the macro story.”