Skip to the content

Which Asia Pacific funds have protected the best against the downside?

01 April 2014

In the next article of the series, FE Trustnet takes an in-depth look at the best performing funds in the IMA Asia ex Japan sector of late.

By Daniel Lanyon,

Reporter, FE Trustnet

Hermes Asia ex Japan Equity is the only fund in the IMA Asia Pacific ex Japan sector to make money since the severe market sell-off started back in May 2013, according to FE Research.

Slowing GDP growth – particularly in China – and talk of QE-tapering in the US have hit emerging Asian funds very hard of late, with the MSCI AC Asia ex Japan index down almost 11 per cent since 22 May last year.

However, the $434m Hermes Asia ex Japan Equity fund, run by Jonathan Pines, has returned 7.28 per cent since the market sell-off, the only fund to achieve a positive performance over this period.

Performance of fund, sector and index 22 May 2013

ALT_TAG

Source: FE Analytics


The next best performing fund in the sector over the period – Fidelity Institutional Pacific ex Japan – has lost 3.25 per cent, putting it around 10 percentage points behind Hermes.

Hermes Asia ex Japan Equity was launched into the IMA unit trust and OEIC universe in November 2012; however Pines has been running the strategy for private clients for nearly three and a half years.

The fund has been the top performer in the sector since inception, returning 28.99 per cent to investors compared to 6.33 per cent from the sector average and 4.25 per cent from the index.

Other funds that have handled the downturn well include Veritas Asian and Allianz Total Return Asian Equity, which were the third and fourth best performers, respectively. Aberdeen and First State has traditionally done very well in times of stress, but neither Aberdeen Asia Pacific nor First State Asia Pacific Leaders have come anywhere near to protecting investors against losses since May last year.

Performance of funds, sector and index since 22 May 2013

ALT_TAG

Source: FE Analytics


Hermes’ significant overweights in Korea and China have helped performance, though stock picking has been the biggest contributor to the outperformance overall. Pines’ underweight positions in South East Asian countries such as Thailand and Malaysia has also helped.

The likes of Aberdeen and First State have traditionally been prepared to hold expensive stocks that fit in with their strict screening process. While Pines targets quality companies, he has more of an emphasis on valuation than many of his peers. This has helped the manager in recent months, with many of the most expensive stocks falling further in the sell-off.

Traditionally dividend-paying stocks have protected better against the downside than those that focus on growth, but the likes of Newton Asian Income and Schroder Asian Income have struggled in the recent sell-off.

Performance of funds and sector since 22 May 2013


ALT_TAG

Source: FE Analytics


Pines says things are likely to get even worse for this area of the market, as expensive valuation following a strong run between 2009 and 2012 continue to unwind.

“I would say [this is] exactly where you don’t want to be right now,” he said. “I would be very cautious if I was an investor in an [Asian] income fund.”

Editor's Picks

Loading...

Videos from BNY Mellon Investment Management

Loading...

Data provided by FE fundinfo. Care has been taken to ensure that the information is correct, but FE fundinfo neither warrants, represents nor guarantees the contents of information, nor does it accept any responsibility for errors, inaccuracies, omissions or any inconsistencies herein. Past performance does not predict future performance, it should not be the main or sole reason for making an investment decision. The value of investments and any income from them can fall as well as rise.