Exploit Asian value with Schroder AsiaPacific Fund

Schroder AsiaPacific Fund (SDP) trades on a discount to NAV of more than 10 per cent. The investment trust also has a good performance record: it has beaten its benchmark, MSCI AC Asia ex Japan, over one, three and five years, both in terms of NAV and share price performance. It also beat the Association of Investment Companies (AIC) Asia Pacific - Excluding Japan sector average over one, three and five years.

"The trust benefits from Schroders' well-resourced team of analysts, and the investment approach is differentiated from a number of peers, such as Aberdeen Asset Management and First State, by [fund manager] Matthew Dobbs' emphasis on growth," say analysts at broker Winterflood. "Given the fund's approach there are likely to be periods when it underperforms its benchmark. However, we believe that Matthew Dobbs will continue to deliver outperformance over the longer term, given his experience and unconstrained approach."

The trust's 10 per cent-plus discount is wider than a number of its sector peers so could represent an attractive entry point. IC Top 100 Fund Pacific Assets Trust (PAC), for example, is on a discount of less than 1 per cent.

Winterflood adds that the investment trust has performed well against its benchmark index in both rising and falling markets. Recent performance has been boosted by stock selection in India, where shares have done well since the election of a new government in May, as well as an overweight position in Thailand. Earlier this year Thai stocks hit a 15-month high when army chief General Prayuth was named as Prime Minister, boosting investors' hopes of a stable growth path.

The trust has a very experienced manager in Matthew Dobbs, who also runs IC tip Schroder Oriental Income (SOI), and has been running Asian specialist portfolios since 1985.

Read our tip on Schroder Oriental Income

He tends to choose portfolio holdings according to companies' individual merits rather than sector or geographic considerations. He and his team also try to invest in good companies at a reasonable price. And Schroder AsiaPacific Fund has a reasonable ongoing charge of 1.11 per cent.

But although the trust trades at a discount to NAV of more than 10 per cent, this is at a similar level to its 1-month average, and it has often traded at similar levels over the past few years, so there is no guarantee the discount will tighten, even if the trust continues to do well.

Schroder AsiaPacific also has fairly high exposure to greater China, with Hong Kong, China and Taiwan accounting for more than half of its assets. Concentration on one area theoretically increases risk, although conversely if the area does well then the fund could get ahead of peers less focused on that area.

But whether or not the discount tightens the trust's good performance record and experienced manager makes it a good option to exploit Asia while that market is cheap. Buy.

Source: Morningstar, *Schroders.

Performance

Source: Morningstar as at 24 November 2014

TOP 10 HOLDINGS as at 31 October 2014 (%)

Geographic breakdown (%)