The most consistent funds of the decade: IA Asia Pacific ex Japan

Invesco Perpetual Asian is the most consistent IA Asia Pacific ex Japan fund of the past decade, beating the sector average in every one of the past 10 years.

Of the 57 funds with a long enough track record, another four – Schroder Asian Income, Schroder Asian Alpha Plus, Fidelity Asia and Fidelity Asian Special Situations – outperformed the sector average in eight of the past 10 years.

Most consistent IA Asia Pacific ex Japan funds over 10yrs

Source: FE Analytics

William Lam became sole manager of Invesco Perpetual Asian in May 2017, with previous lead manager Stuart Parks continuing to head the group’s Asian equity team.

The team seeks to take advantage of investors' behavioural biases and resulting market inefficiency by applying a flexible approach, which focuses on fundamental analysis with a strong emphasis on valuation levels.

Square Mile Investment Consulting & Research said this fund holds plenty of appeal, with Lam and his colleagues benefiting from their extensive experience in this area.

“The manager uses the conclusions he has derived at the country, sector and stock level to build a portfolio of stocks that he believes will deliver superior performance in a range of economic conditions,” the research house added, although it warned that the fund may struggle when the wider market is chasing “hard certain themes” over the short term.

“The manager's valuation discipline can also spell periods of underperformance, for instance with some of the contrarian and undervalued stocks in the portfolio, as it might take some time for the wider market to recognise their worth,” the team said.

Earlier this year, Parks said there was scope for Asian stocks to rally further in 2018.

“The consensus earnings per share growth forecasts are dependent on a continuation of a benign global backdrop,” he explained. “In our view, such an environment is a fertile ground for stockpicking opportunities. We believe the market valuations of many Asian companies do not reflect their ability to grow earnings, generate strong free cash flow and increase dividends.”

Invesco Perpetual Asian made 189.35 per cent over the 10-year period in question, compared with 105.67 per cent from the IA Asia Pacific ex Japan sector. The £2.3bn fund has ongoing charges of 0.95 per cent.

Performance of fund vs sector over 10yrs

Source: FE Analytics

Of the four funds that beat the sector in eight of the past 10 calendar years, Schroder Asian Alpha Plus made the highest total return at 209.82 per cent.

Darius McDermott, managing director of Chelsea Financial Services, recently named the fund as one of his ISA picks for 2018.

“For those looking for regional diversification, we prefer emerging market equities to many of their developed market counterparts, and we particularly like the fundamentals on offer in Asia,” he said.

“We think Schroder Asian Alpha Plus – which is headed up by Matthew Dobbs – presents itself as a good option.

“Dobbs has extensive knowledge of the Asian equity market, having lived and worked in Singapore for several years. The manager adopts a completely flexible multi-cap and predominantly bottom-up approach to stock selection, which is supported by Schroders’ large and well-resourced research team.”

The £870m fund has ongoing charges of 0.95 per cent.

Next up is Schroder Asian Income, with 10-year returns of 186.93 per cent. Richard Sennitt’s £1.3bn fund is on the FE Invest Approved List, with the analysts saying it is one of the few focusing on the Asia Pacific region that offers income to investors – and it has increased this amount each year, even through the financial crisis.

Performance of funds vs index over 10yrs

Source: FE Analytics

“It also offers investors different sources of income and currency exposure for diversification purposes, as mainstream income funds available in the market are more UK- or developed-market focused,” the analysts explained.

However, they warned that the link between global equity markets when they crash is growing stronger and Asia is still very dependent on western economies.

“As a result, this fund is probably best used as a satellite fund alongside a more mainstream core fund,” they finished.

Schroder Asian Income has ongoing charges of 0.93 per cent.

In third place with gains of 152.45 per cent is Fidelity Asian Special Situations. Manager Suranjan Mukherjee bases his stock selection on fundamental bottom-up research, favouring companies where valuations are cheap relative to improving earnings. This may be due to the market not fully appreciating either their long-term growth prospects or the impact of cyclical recovery.

“Mukherjee looks for companies that have established themselves as global leaders through technology, scale or cost structure, as well as companies benefiting from long-term themes or turnaround situations,” said Fidelity.

Fidelity Asian Special Situations is $2.8bn in size and has ongoing charges of 1.94 per cent.

Last up with returns of 149.17 per cent is Teera Chanpongsang’s Fidelity Asia fund.

Chanpongsang looks for companies that trade below their intrinsic value. He has a flexible approach and considers all industries and investable markets within the region, seeking companies with improving fundamentals or unrealised growth potential, as well as businesses that are well positioned to benefit from cyclical rotations in their industry.

Square Mile said Chanpongsang's willingness to stay true to his philosophy and maintain positions can lead to short-­term setbacks, for example when markets are influenced by external events rather than company fundamentals.

“However, the manager's experience of investing through different economic conditions gives him the edge one needs to run this type of strategy,” it added. “We believe this fund may be an attractive choice for investors with a long-­term horizon.”

The £2.8bn fund has ongoing charges of 0.97 per cent.