For example, a note for the Easter week from Winterflood Securities (WINS) picked out Aberdeen Asset Management’s Edinburgh Dragon, JP Morgan’s Chinese, and F&C Investment’s Pacific Assets Trust funds as recording top one-day NAV movement.
| Daily movements in NAVs | 7 April | 8 April | Change % |
| Edinburgh Dragon | 234.33 | 237.49 | 1.4% |
| JPM Chinese | 154.59 | 156.66 | 1.3% |
| Pacific Assets | 132.10 | 133.76 | 1.3% |
Source: Winterflood Securities
Each investment trust has particular exposure to Asia, and the movement indicates volatility in the sector over one day, but is this necessarily the case over time?
Over a one year period, Edinburgh Dragon took on around 30 per cent volatility for less than 20 per cent total NAV returns, WINS data suggests. Pacific Assets, meanwhile, took on less risk – around 17 per cent – but returned a similar NAV total; 60 per cent. As JPM Chinese is in a different sector, Country Specialist Asia Pacific, it has not been included in this data.
However, Financial Express data does enable a risk/reward comparison of a similar nature across all three funds and their respective AIC sectors over the 12 months to the end of March. Notable is how each of the three funds have underperformed their respective sectors in this period - although one should beware the difference between NAV based and share price returns based performances.
A three year outlook gives a different picture, however. Edinburgh Dragon took on the least risk, about 23 per cent, for the best return, around 40 per cent. Pacific Assets took on 30 per cent of volatility, while returning 20 per cent in NAV terms, according to WINS. The Financial Express data again paints a similar picture.
Aberdeen Asset Management’s Edinburgh Dragon IT has seven holdings in India, two of which are multinationals. Its management team favours India, Singapore and Hong Kong.
“Indian companies aren’t particularly cheap, but their return to equity is the highest in the market,” Andrew Gillan, senior investment manager at Aberdeen says. “Singapore offers the opportunity for expansion into South East Asia – particularly Indonesia, Malaysia and Thailand – and there is a good platform for expansion into China from Hong Kong.”
Gillan says the region as a whole has been performing well over the past six months as people look East for strong macro economic growth. “Banks in Asia survived the crash, and corporate and consumer debt levels are better than in the West,” he points out.
Despite the perceived success of the geography, however, some investors may prefer to stay away from investing via investment trusts.
“It depends on whether you believe in the investment trust model,” Chris Wise, IFA at Bentley Jennison says. “You can generally get exposure to the area you want within the UT and OEIC universe. We have some exposure to it through Jupiter, but are hesitant on the widening discounts and the issue of selling on shares involved with ITs,” he says.
James Brown, analyst at Winterflood Security Trusts says: “The case for investing in Asia on a regional basis remains compelling. The region is dynamic and potentially rewarding for investors, particularly compared with heavily indebted western economies. There is more to Asia than just China."
He says that Indonesia and Vietnam offer the possibility of high returns, albeit with substantial risks, while more mature economies such as Korea and Singapore possess a number of well-established, global companies. The Indian economy is set to benefit from the increasing affluence of its developing middle class.