WHAT I BOUGHT LAST
SCHRODER
ASIA PACIFIC
Smith & Williamson’s James Burns explains why he is a fan of Schroder
Asia Pacific’s focus on “growth at a reasonable price”
W
e recently took a position in the
Schroder Asia Pacific trust, which
has been managed by Matthew
Dobbs in London since its launch 20 years ago.
He is supported by Richard Sennitt.
Dobbs and Sennitt rely on bottom-up
stock selection, based on the fundamental
research of their in-house local analysts,
combined with a top-down overlay. This
results in 60 to 80 holdings, with no
position accounting for more than 5 per
cent of the portfolio.
The managers look for growth at
a reasonable price through quality
companies with solid balance sheets,
sustainable earnings and proven
management teams.
We believe the trust is positioned to
benefit from domestic growth in the region
and we like the fact it tends to avoid more
volatile sectors with lower predictability of
earnings, such as materials and energy.
Exposure to China is low due to concerns
over corporate governance standards
and the risk of bad debts. In this light, the
managers prefer to gain Chinese exposure
via Hong Kong, where listing requirements
are more stringent and governance is
more robust. We have recently reduced
our exposure to Fidelity China Special
Situations following an extremely strong
run. Market valuations are now very rich
and the ride looks like it will be bumpy
from here.
Travelling further east, we have recently
added to our position in Polar Capital Japan,
rotating out from GLG Japan after the
latter’s outperformance. Japan’s strong run
has so far been driven by a cheap yen and a
flood of domestic pension money pouring
into the equity market, which has benefited
large caps in particular. However, we
think the character of Japan’s bull market,
driven by passive money and led by large
caps, could become more broad-based and
discriminating.
Polar Capital has a stronger domestic
market and mid cap bias compared with
GLG’s greater large-cap tilt. This could turn
out to be a significant positive for Polar as
the benefits of Prime Minister Shinzo Abe’s
“three arrows” finally feed through in the
form of increased wages and demand, which
should see domestically orientated stocks
rally further. The fund has a value bias
and targets companies with good earnings
growth at cheaper valuations than the
broader market.
Finally, back home: in our MM Endurance
Balanced fund, we have switched from
Artemis Income into Investec UK Alpha,
thus reducing a heavy overweight to
income and allocating to a manager –
Simon Brazier – on whom we are very
positive. We held his fund while he was at
Threadneedle and are happy to invest now
he is settled into his role at Investec.
James Burns is head of multi-manager at Smith
& Williamson