Hermes Asia ex Japan Equity and Schroder Tokyo are some of the Asian equity funds that top financial advisers believe could be appropriate for investors of most ages, given that they are featured in all three of the FE Adviser Fund Index (FE AFI) portfolios.

In an ongoing series of articles, we have been looking at the funds that can be found in the aggressive, balanced and cautious FE AFI portfolios, which are compiled by a panel of some of the country’s leading financial advice firms and are made up of the funds they believe are appropriate for investors of different risk tolerances.

The FE AFI Aggressive portfolio contains funds that the panel thinks could be suitable for an investor in their late 20s, FE AFI Balanced holds funds for a person in their mid-40s and FE AFI Cautious is made up of funds for those in their late 50s. These selections assume the investor is saving for a pension at 65.

Having previously examined UK, global, European and absolute return funds, we now reveal which Asia Pacific and Japanese equities funds – which have had a relatively strong 2017 – could be suitable for most investors.

Hermes Asia ex Japan Equity

Performance of fund vs sector and index over 3yrs

Source: FE Analytics

Looking at the IA Asia Pacific ex Japan sector, one member that advisers think could be appropriate for investors of all ages is FE Alpha Manager Jonathan Pines’ $3.7bn Hermes Asia ex Japan Equity fund. It is in the sector’s top decile over one and three years and is its best performing member over five years with a 174.78 per cent total return.

The fund has an inherently contrarian and value bias, with the team behind it buying stocks that are attractively priced relative to the quality of the underlying company. It invests across the quality spectrum, looking for very high quality companies at attractive valuations relative to their peers and their own history through to lower quality companies trading at extraordinarily cheap prices.

Square Mile gives the fund an ‘A’ rating and said: “The underlying investment philosophy for this strategy, for which the manager shows clear passion and commitment, is fairly straightforward.

“Mr Pines could be viewed as an opportunistic investor, looking to invest where there is a valuation discrepancy. However, and importantly for a strategy such as this, he is also deeply aware of the potential loss for any investment and hence looks for a margin of safety before any purchase is made.”

Hermes Asia ex Japan Equity has a 0.85 per cent OCF and holds five FE Crowns. It must be noted that the fund is closed to new investors.

Schroder Asian Alpha Plus

Performance of fund vs sector and index over 3yrs

Source: FE Analytics

Matthew Dobbs’ £800.7m Schroder Asian Alpha Plus fund, which is top quartile over one-, three- and five-year periods, is another Asian equity fund appearing in the FE AFI aggressive, balanced and cautious portfolios.

At the heart of Dobbs’ process is an analysis of the attractiveness of different countries and their industries in which he aims to find areas where companies and can make money over the long run. He also draws upon Schroders’ Asian resources to assess the financial health of each company and to ensure that their management’s interests are aligned with shareholders.

The FE Invest team, which has the fund on its Approved List, said: “The fact that businesses are scrutinised from a corporate governance angle is encouraging – as is the in-house assessment of how they treat shareholders. This means the companies identified are transparent and their interests are aligned with those of the fund manager and final investor.”

The portfolio currently has its biggest sector weightings to information technology, financials and consumer discretionary, with China, Hong Korea and South Korea representing the largest geographic allocations. Samsung Electronics, Tencent and Alibaba Group are the top three positions.

Schroder Asian Alpha Plus has 0.95 per cent OCF. It has five FE Crowns.

Schroder Asian Income

Performance of fund vs sector and index over 3yrs

Source: FE Analytics

The final IA Asia Pacific ex Japan fund in all three FE AFI portfolios is Schroder Asian Income, which is managed by Richard Sennitt. This fund is in the sector’s top decile over 10 years, but slips into the second quartile over five years and the third quartile over three years.

As its name suggests, the £1.3bn fund aims to generate an income – targeting an annual yield of 3.5 per cent to 4 per cent over rolling three-year periods – alongside some capital appreciation. To this end, Sennitt seeks out companies with attractive yields or the potential to grow its dividend.

The portfolio is currently overweight in Hong Kong, Taiwan and Singapore with underweights to Australia, China and South Korea. That said, the largest holdings are Taiwan Semiconductor Manufacturing Company, Samsung Electronics and HSBC.

Square Mile said there are “quite a lot of things to like” about the fund: “Foremost, we think highly of the manager, who is a skilled investor and has followed the Asian markets for a considerable amount of time. He has a fine appreciation of the nuances and complexities of investing in these markets and the opportunities that can emerge when investors throw the baby out with the bath water in volatile periods.”

Schroder Asian Income has a 0.93 per cent OCF and is yielding 3.66 per cent. It holds three FE Crowns and is a member of the FE Invest Approved List.

Schroder Tokyo

Performance of fund vs sector and index over 5yrs

Source: FE Analytics

Moving over to the IA Japan sector and the only member that is found in all three FE AFI portfolio is Andrew Rose’s £3.7bn Schroder Tokyo fund. It is presently in the peer group’s second quartile over three-, five- and 10-year periods.

Rose has been running Japanese equity portfolios since the 1980s, making him one of the most experienced managers in the industry when it comes to this space. His process revolves around finding companies that the market has a short-term negative view on but he believes could surprise on the upside over the coming years.

The portfolio’s largest holdings include Toyota Motor, rubber product firm Bridgestone and Sumitomo Mitsui Financial Group. Among its overweights are the transportation equipment, land transportation, retail trade and machinery sectors.

The FE Invest team noted: “Overall the fund provides broad exposure to the Japanese equity market. A bias towards lower-valued companies underlies this strategy, but it can nonetheless be used as a core exposure to Japanese equities within an investor’s portfolio.”

Schroder Tokyo has an OCF of 0.91 per cent, and holds an FE Crown rating of three.