The likes of Aberdeen New Dawn IT, Aberdeen Asian Smaller Companies IT and Scottish Oriental Smaller Companies IT have been among the best performers in their sector in recent years, and discounts have typically been narrow as a result. The teams at First State and Aberdeen put a big emphasis on quality companies with strong balance sheets and predictable earnings, which has stood them in good stead over the past five years.
Numis says Dobbs (pictured) has a similar bias, but is more open-minded when valuation-driven opportunities emerge.
"We see some similarities with the long-term, value-driven approach of other leading Asia Pacific managers such as First State and Aberdeen, but we feel that Matthew Dobbs has a more pragmatic approach to exploiting investment opportunities," said Numis.
Charles Cade, an analyst at the firm, added: "All three groups put an emphasis on quality, balance sheets, cash flow and so on, but the Schroders trust is more likely to dip into cyclicals that are perhaps lower in quality, and REITs (real estate investment trusts) if Dobbs thinks they are cheap."
"Aberdeen and First State are more rigid when it comes to their quality screens and will only look at valuations after the company has got through. Schroders is a bit more flexible."
"All three groups have excellent records, but it just means that Dobbs can shift away from quality growth names more easily if he thinks other areas are more interesting."
Cade points out that while Schroder Asia Pacific IT, Aberdeen New Dawn IT and Scottish Oriental Smaller Companies IT have all been hit by the softer performance of quality names this year, the Schroders trust is starting to shift its focus.
"All have been affected by being underweight China, which has had a good time recently," he added.
Performance of trusts and index over 6 months
Source: FE Analytics
All of the trusts have significantly outperformed their peer group and benchmark over the longer term, and are ahead over three, five and 10 years.
The Schroders trust is the least volatile of the three over the last decade, with an annualised score of 21.57 per cent. It has returned the least, however.
Risk/return of trusts and index over 10yrs
Source: FE Analytics
Dobbs has run Schroder Asia Pacific since 1995. It is currently trading on a discount of 10.5 per cent and actively uses share buy-backs to protect it at this level.
This makes it significantly cheaper than Angus Tulloch's First State trust, which is trading on a discount of just 1 per cent, and a touch cheaper than Hugh Young’s Aberdeen New Dawn IT, which is currently trading on a discount of 9.3 per cent.
Dobbs is a great believer in the emerging markets consumer story – unlike rival Somerset manager Ed Lam – and says that falling share prices have unearthed some attractive entry points for companies in this area.
"Dobbs believes that most Asian countries are in a solid financial condition," said Numis. "He notes the concerns remaining over the pace of growth, particular in China, but believes that Asian markets are cheap on a historic basis and he is seeing an increasing number of stocks trading at attractive discounts to fair value."
The manager’s portfolio is not thematically driven, but he tends to avoid volatile sectors such as materials and energy, which have low predictability of earnings. He prefers sectors with exposure to the Asian domestic growth story, such as consumer discretionary and industrials.
Financials is the largest allocation through REITs, holding companies and insurers. He is also overweight technology, including TSMC and Baidu.
From a regional point of view, Thailand is the largest overweight, due to increased political stability, while a preference for well-regulated, well-managed companies with strong balance sheets means that Hong Kong, Singapore, and Australia are also overweight positions.
The manager is positive on the outlook for India and has increased his exposure to the region, favouring domestically focused companies. As mentioned earlier, the portfolio is underweight China due to concerns over corporate governance and the risk of bad debts.
The Schroder Asia Pacific trust has ongoing charges of 1.18 per cent.
