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Strong performance helps Schroder Asian TR’s NAV move to a premium

Strong performance helps Schroder Asian TR’s NAV move to a premium –  The NAV of Schroder Asian TR (ATR) rose by 34.8% on a total return basis for the 12 month reporting period to 31 December 2017.  Being a total return fund, the manager is agnostic towards the performance and the make up of market indices. However, so that shareholders can appraise the performance of the company, they quote the performance relative to a reference benchmark, the MSCI AC Asia Pacific ex Japan index. The reference benchmark, returned 25.1% over the year.   The average peer group NAV returned 29.9% on a total return basis. The share price returned 43.9% on the same basis and moved to a premium of 2.0% at the year end (from an average discount of 2.2%). It is worth noting that the peer group trades on an average discount to NAV of 8.0%.

Strong performance helps Schroder Asian TR’s NAV move to a premium

The manager noted that ASEAN markets were up over the year but trailed the region as high valuations and relatively weak earnings growth weighed on sentiment. The Australian market index was a laggard, dragged down by the heavily weighted financial sector as tighter regulations and slowing home loan growth weighed on the longer term outlook for the major banks.

The chairman noted in his summary that stock selection made a particularly positive contribution to the the total and relative performances of the fund. The managers reported that Chinese stocks were the biggest contributors to returns, with internet, consumer discretionary and healthcare names performing positively. Internet stocks saw a strong re-rating on the back of a global tech rally and on expectations of continued expansion of China’s growing online economy. Across other markets, technology stocks advanced led by Korean IT conglomerate Samsung Electronics and in Taiwan.  This was partially offset by Australian logistics company Brambles and sluggish growth for some of the ASEAN consumer staples names also weighed on returns. The manager has subsequently sold out of positions in ASEAN consumer names.

Capital protection (in the form of put options on the Australian, Hong Kong, China H-share, Korean and Taiwan markets) was a drag given strong rising markets.

Manager re-location

During the year, Robin Parbrook re-located from Hong Kong to London. The board believes that this has no adverse implications for the company. His co-manager King Fuei Lee remains based in Singapore.

Chairman’s outlook

“Following a year of strong absolute performance in 2017, achieved in spite of the protective hedging which underpins the investment policy, it is possible that markets may prove more challenging this year. Should this be the case, we remain confident that the derivative protection integrated into the investment strategy will be of comfort for those looking for long-term exposure to Asia with lower volatility than the Reference Index.”

David Brief – Chairman

ATR : Strong performance helps Schroder Asian TR’s NAV move to a premium

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