The £228m Asia Pacific Sustainability fund has returned 112 per cent over the period, while the £6bn Asia Pacific Leaders fund has returned 105 per cent. The average fund in the sector has returned 110 per cent in this time.
Performance of funds vs sector over 3-yrs
Source: FE Analytics
Managed by David Gait and Sashi Reddy, the smaller fund is also the least volatile investment in the sector, with an annual score of 19.03 per cent. By comparison, Angus Tulloch’s fund has a score of 19.43 per cent, making it the second-least volatile vehicle.
Looking at the funds’ respective FE Risk Scores, the First State Asia Pacific Sustainability fund has a score of just 77, exceptionally low for an Asia Pacific equity fund, while the larger fund has a score of 88.
FE Risk Scores define risk as a measure of volatility relative to the FTSE 100 index, which has a fixed risk rating of 100. The methodology of the rating makes the scores more reactive to recent events rather than old ones.
The relative outperformance of Gait and Reddy’s fund is surprising given that FE Alpha Manager Angus Tulloch’s Asia Pacific Leaders fund has attracted more assets under management (AUM) from investors than any other retail investment vehicle in the last three months. Inflows over that period stood at £1.175bn, more than five times the total AUM of the smaller fund.
It is even more surprising given the reputation of ethical and sustainable investments. Most IFAs simply do not consider this type of fund unless their client has expressed a specific wish to invest in this way.
The Asia Pacific Sustainability fund certainly bucks the trend. A recent FE Trustnet study showed that the vast majority of funds with an ethical or sustainable focus have underperformed their benchmark because of the limited universe in which they are allowed to invest.
Gait says that the key to the success of the fund is to put more emphasis on capital preservation than on absolute return.
"We are all very excited about the long-term potential of Asia and emerging markets over the next 20 years," he said. "We are also convinced that it will not be a smooth ride, with many accidents along the way. We feel that the secret to long-term performance in Asia is not to make as much money as possible on the way up, but rather to hold on to as much as possible on the way down, when our markets inevitably fall."
He added: "We actively seek out, from amongst our favourite companies, those who are particularly well-positioned to contribute to the sustainable development of Asia and emerging markets."
"Peripheral areas of the market such as South Korea, the Philippines and Taiwan continue to offer good pockets of value. We would note in passing that many good quality companies in the US and Europe appear to be much more reasonably priced at present than their Asian counterparts. While the long-term growth prospects are certainly better in Asia, perhaps investors in these asset classes are still expecting too much?"
Over five years, Angus Tulloch’s funds have outperformed but, only marginally. The First State Asia Pacific Leaders and the First State Asia Pacific funds have returned 105 per cent and 102 per cent respectively while Gait and Reddy’s fund has returned 96 per cent over the period.
Only the Aberdeen Global Asian Smaller Companies and Franklin Templeton Asian Growth portfolios have returned more, though they are higher risk.