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Martin Currie Asia Unconstrained and unimpressive

Martin Currie Asia Unconstrained and unimpressive – Martin Currie Asia Unconstrained has published results covering the year ended 31 March 2019. Five years ago, the trust took the unusual decision to benchmark itself against Asian GDP growth rather than Asian equity markets. Since the Asia Long-Term Unconstrained mandate was adopted on 1 August 2014, the NAV has risen by 50.6%, in total return terms, while Asian nominal GDP growth has been 57.6%. This is a disappointing result.

Performance over the trust’s accounting year was also poor in this respect – an NAV return of 2.4% against a 5.7% increase in nominal GDP growth. The return to shareholders was a bit better, coming in at 3.8%. The NAV return did at least come in ahead of the MSCI AC Asia ex Japan Index.

Martin Currie Asia Pacific pays an enhanced dividend, topping up revenue of 8.6p in the year to make a dividend of 16.7p, unchanged from the previous year. Presumably, the board instituted this because it wanted to attract investors in search of income. With a yield of 4% it might have eventually succeeded in that ambition, however it objects to being in the Asia Pacific Income sector.

Having failed to convince new investors of the attractions of the Asia Unconstrained strategy, the board decided to cure the trust’s long running discount problem by offering investors the choice of Asia Unconstrained in an open-ended format or cash. Investors who don’t want to crystallise a capital gain are forced into the open-ended fund. Investors who prefer investment trusts will find that most of the decent funds in Asia are trading at premiums and will have to incur transaction costs.

Extract from the manager’s report

The largest positive contributors to returns came from investments in the financial services, utilities and technology sectors. At the individual stock level, pan-Asia life insurer AIA again delivered strong returns. Two of the ‘new purchases’ featured in last year’s annual report, India’s leading private sector bank, HDFC Bank, and Hong Kong-listed water utility Guangdong Investment, also made notable positive contributions, as did Chinese gas utility ENN Energy (along with AIA, also a top performer in the prior fiscal year). Our two investments in the Indian IT services industry, Tata Consultancy Services and Infosys, were the main drivers of technology sector returns and, after being out of favour in the prior year, China Mobile performed well thanks to the company’s stable earnings profile and attractive dividend. Singapore Technologies Engineering, added to the portfolio less than a year ago, made a positive start.
The main detractors to performance were largely confined to the consumer discretionary sector. Our Indian consumer stocks, Hero MotoCorp and Maruti Suzuki, have been depressed as growth in new vehicle sales has slowed. However, the worst performing stock was the Indian financial inclusion services provider Vakrangee.”
MCP : Martin Currie Asia Unconstrained and unimpressive

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