The list of IA Asia Pacific Excluding Japan funds that have performed strongly on a variety of closely-watched metrics is dominated by offerings from Stewart Investors, FE Trustnet research shows, although the group has lost the top spot to another long-term outperformer.
As part of an ongoing series, we have been looking at the average decile rankings of funds when it comes to cumulative five-year returns to the end of 2016, those for the three most recent individual calendar years, annualised volatility, maximum drawdown, alpha generation, Sharpe ratio, downside capture and upside capture.
In this article, we look at the funds in the IA Asia Pacific Excluding Japan sector and use the MSCI AC Asia Pacific ex Japan index for comparison purposes, although this will not be benchmark for every member of the peer group.
Performance of sector vs index over 5yrs to 31 Dec 2016
Source: FE Analytics
Stewart Investors is one of the dominant players in the Asian equity space and this is reflected in the findings of this study. However, while the group has a number of its portfolios on the leaderboard, it’s a Veritas fund that has taken the top spot.
Over the following pages, we look at the five IA Asia Pacific Excluding Japan funds with the lowest average decile ranking for the 10 metrics, as well as revealing the top 20 on the final page.
Stewart Investors Asia Pacific Leaders
Performance of fund vs sector and index over 5yrs to 31 Dec 2016
Source: FE Analytics
In fifth place with an average decile ranking of 2.7 is the £9.7bn Stewart Investors Asia Pacific Leaders fund, which is headed up by FE Alpha Manager David Gait and Sashi Reddy. However, for the bulk of its track record it had Asian equity veteran Angus Tulloch at the helm. The FE Invest team said: “The transition from Angus Tulloch to David Gait and Sashi Reddy has been smooth, as we anticipated. The two new managers have worked with Tulloch for a long time and they perfectly adhere to Stewart Investors’ unique investment philosophy.” The fund’s 76.1 per cent total return over the five years to the end of 2016 puts it in the sector’s second decile; it is in the top decile for alpha generation, volatility, maximum drawdown, Sharpe ratio and downside capture. Stewart Investors Asia Pacific Leaders, which has an ongoing charges figure (OCF) of 0.89 per cent, is in the sector’s bottom decile over 2017 to date.
Stewart Investors Asia Pacific Sustainability
Performance of fund vs sector and index over 5yrs to 31 Dec 2016
Source: FE Analytics
The second Stewart Investors fund on the list is Stewart Investors Asia Pacific Sustainability, which has an average decile ranking 2.6 in our research. Also managed by David Gait and Sashi Reddy, the £446m fund focuses on Asian stocks that are positioned to benefit from, and contribute to, the sustainable development of the countries in which they operate. Square Mile Investment Consulting & Research said: “We like the strong investment culture of Stewart Investors, which has been in place since the late 1980s. The whole team adhere to a process that over time has advanced to include environmental, social and governance factors, which in itself is still a rare feature in the fund investment industry. The main difference between the sustainable fund range and other Stewart Investors portfolios is that the managers will only select from their list of favourite companies, those with the very best longterm sustainability positioning for inclusion in the sustainable range, while they have more flexibility within their other funds.” Stewart Investors Asia Pacific Sustainability is in the bottom decile over the year to date. It has ongoing charges of 1.02 per cent and carries a 4 per cent initial charge.
Schroder Asian Income
Performance of fund vs sector and index over 5yrs to 31 Dec 2016
Source: FE Analytics
In third place after scoring an average decile ranking of 2.5 is Richard Sennitt’s £1.2bn Schroder Asian Income fund. Unlike the other funds mentioned in this article, this portfolio has the aim of generating income as well as capital growth. FE Analytics shows it is currently yielding 3.81 per cent while an initial investment of £10,000 would have resulted in a total payout of £2,596 over the five years examined in this research. “The fund has been posting strong performance with lower volatility than peers, thanks to the yield-focused strategy,” the FE Invest team said. “The team adopts a dynamic approach managing this fund, with great flexibility to move around different asset classes, regions and currency exposure according to the team’s top-down calls, with no benchmark constraints.” Schroder Asian Income, which is in the sector’s eighth decile over 2017 to date, has an OCF of 0.93 per cent.
Stewart Investors Asia Pacific
Performance of fund vs sector and index over 5yrs to 31 Dec 2016
Source: FE Analytics
The third and final Stewart Investors fund on the list has an average decile ranking of 2.3. Stewart Investors Asia Pacific is managed by Ashish Swarup and Tom Allen, although it’s another portfolio that was previously run by Angus Tulloch. The £837.8m fund is also soft-closed, imposing a 4 per cent initial charge on new investments. Like the other funds managed by Stewart Investors, it concentrates on quality-growth companies and pays close attention to the quality of management, franchise and financials. As mentioned, the philosophy behind the group’s funds is rooted in sustainable development but the firm also distinguishes this from ‘green’, ‘clean tech’ or ‘ethical’ investing. The fund is in the IA Asia Pacific Excluding Japan sector’s top decile for five-year returns to the end of 2016, alpha generation, volatility, maximum drawdown, Sharpe ratio and downside capture. Over 2017 so far, the fund has made a 10th decile return. Stewart Investors Asia Pacific has a 1.08 per cent OCF.
Veritas Asian
Performance of fund vs sector and index over 5yrs to 31 Dec 2016
Source: FE Analytics
Coming in first place in this research is FE Alpha Manager Ezra Sun’s $712m Veritas Asian fund. It has achieved an average decile ranking of 2.3 in this research but pulled ahead of Stewart Investors Asia Pacific because of its higher five-year return. It is top decile for five-year returns to the end of 2016, alpha generation, volatility, maximum drawdown, Sharpe ratio and downside capture. Sun concentrates on two factors that he considers to be the main drivers of equity returns: dividend yield and earnings momentum. The portfolio is built around a core of high dividend-yielding stocks that tend to have a three to five year holding period, while it also has a short-term trading sleeve that attempts to take advantage of market inefficiencies and earnings momentum. Unlike the other funds highlighted in this article, the fund has performed relatively well in 2017 – making third-decile returns over the year to date. Veritas Asian has a 0.75 per cent OCF.
