Schroder Asian Alpha Plus: June 2020 fund update

Kate Marshall | Tue 30 June 2020

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• This fund offers a way to access long-term growth potential from across the Asia Pacific region
• We rate Matthew Dobbs highly for his experience and track record of investing in Asia
• He has the support of a robust team of analysts based across the region to sift through the market and uncover some of the most exciting opportunities
• This fund has been added to our Wealth Shortlist of funds chosen by our analysts for their long-term potential.

How it fits in a portfolio

This fund aims to provide growth by investing in larger companies across Asia, based in countries such as China, Taiwan and South Korea. It could fit a broader investment portfolio that can have some exposure to a more adventurous fund, which includes higher-risk emerging markets, in the pursuit of long-term growth. The fund could be used as part of a globally diversified portfolio and provide key exposure to Asian markets.

Manager

Matthew Dobbs has been the lead manager of this fund since its launch in 2007. He has plenty of experience investing in Asian and emerging markets, and has researched them for three decades. He's also managed an Asian investment trust since 1995, and currently runs a fund that focuses specifically on higher-risk smaller Asian and emerging markets businesses.

There are hundreds of companies across Asian markets, so Dobbs has the help of co-manager Richard Sennitt and a robust team of 37 analysts based across Asia. They help him sift through the market and uncover what they believe to be the most promising opportunities.

We think Dobbs is knowledgeable and skilled enough to make decisions in his own right, but it's encouraging that he works closely with Schroders' wider group of analysts and receives ideas and insight from them. We believe he is passionate about fund management and cares about investor outcomes.

Process

The managers aim to spot Asian companies with exciting potential, before they're noticed by other investors. They believe they're able to do this thanks to the in-depth analysis carried out by their well-resourced investment team.

Dobbs works closely with Schroders' Asian equities team to help generate research and ideas for the fund. They look for companies they think can sustain returns over the long run. They should have good cash flows, strong franchises, a quality management team, superior corporate governance standards and a strong business model that's able to defend against competition. Next they aim to forecast the earnings of each business, which could ultimately influence the direction of the share price.

Importantly, the managers will only invest if a company's shares can be bought at a price that doesn't yet reflect its longer-term earnings potential.

At the moment the fund is focused on sectors that can be more sensitive to the health of the economy, but could benefit from longer-term trends such as the growing use of technology and online consumer spending. This means the fund is currently focused on sectors such as technology, financials and consumer services. Some of the largest investments currently include Chinese ecommerce businesses Tencent and Alibaba, and insurance firms AIA Group and Ping An Insurance Group. The managers have the ability to use derivatives which, if used, adds risk.

Culture

Schroders is a well-established asset manager with offices based all over the world. It believes the importance of Asian and emerging markets in the global economy has increased significantly over the years, and expects this to continue. We think Schroders is dedicated to investing in this part of the world and supporting the teams that invest there.

Dobbs is currently based in London, though he has spent some time living in Asia too. He's spent his entire investing career at Schroders since 1981 and we think he is loyal to both his funds and other team members. He has built a good franchise of Asian and emerging markets funds at Schroders and enjoys making good returns for investors. We also view it as a good thing that the manager's incentivisation is focused on longer-term performance.

Cost

This fund is available at an annual ongoing fund charge of 0.87%, which we think is reasonable value for a fund in the Asia Pacific ex Japan sector. The HL platform fee of up to 0.45% per year also applies.

Performance

Dobbs has an excellent long-term track record. His Schroder Asian Alpha Plus Fund has performed much better than the broader Asian stock market, as measured by the FTSE Asia Pacific ex Japan Index, since it launched in 2007*. Please remember past performance isn't a guide to future returns.

Over the longer term, our analysis suggests the manager has added value by investing in companies that have gone on to perform well, no matter their size, what sector they're in or what country they're based in. In recent years a focus on technology companies, and those that are seen to have higher growth prospects, have helped performance.

While patient investors have been rewarded with good long-term returns, the managers' investment style means the fund has tended to be more volatile than the average fund in the Asia Pacific ex Japan sector.

So far this year the fund has fallen in value, which is the case for most Asian funds due to the coronavirus crisis. It's held up slightly better than the FTSE Asia Pacific ex Japan Index though, recently helped by good stock-picking in China, Hong Kong and Singapore.

Schroder Asian Alpha Plus - performance since launch

Past performance is not a guide to the future. Source: Lipper IM to *29/05/2020

Past performance is not a guide to the future. Source: Lipper IM to 29/05/2020

More about Schroder Asian Alpha Plus including charges

Schroder Asian Alpha Plus Key Investor Information