Profit from Asian growth without the roller-coaster ride

However, if you don't have such a high-risk appetite or like extreme volatility, Asia is not such an attractive prospect amid the recent turbulence. But a way to invest in Asian growth without as much volatility could be Asian Total Return Investment Company (ATR). This trust invests in Asia ex Japan for a high rate of total return, but also aims for capital preservation via derivatives, for example, selling index futures or buying index puts.

And the investment trust has succeeded in its aim, outperforming the Association of Investment Companies (AIC) Asia Pacific - excluding Japan sector average and its benchmark MSCI AC Asia Pacific Ex Japan Index over one, three and five years in terms of share price returns.

Over calendar year 2015, its share price only fell 0.6 per cent against a fall of 3.85 per cent for its benchmark, while its net asset value (NAV) increased 2.95 per cent.

"This was a result of positive stock selection particularly from holdings in China, India and Hong Kong, as well as the use of derivatives for capital protection," explain analysts at broker Winterflood. "Exposure to small- and mid-cap stocks proved positive."

At the end of last year, about a third of the portfolio was in companies with market caps of less than $3bn.

Asian Total Return is focused on blue-chip names in Hong Kong, Taiwan, India and Australia in the technology, consumer, commercial property and telecom sectors. It has little exposure to banks because its management team is concerned about rising bad debts.

The trust has been run by its current managers at Schroders since March 2013 over which time its NAV is up 10 per cent compared with 2 per cent for its benchmark, according to Winterflood. Its managers, Robin Parbrook and King Fuei Lee, also have a strong longer-term performance record with Schroder ISF Asian Total Return Fund (LU0378801590), which is run along the same lines as Asian Total Return.

Asian Total Return is on a discount to NAV of around 9 per cent - one of the widest levels since its current managers took it over. But if the trust continues to do well the discount could tighten to some of its previous levels, which include at times a premium to NAV.

"We believe the team's impressive track record and the differentiating hedging strategy, which has been implemented to good effect, warrants a narrower discount than the sector average," says Mick Gilligan, head of research at broker Killik.

The trust's board also seeks to keep the discount at no more than 5 per cent over the long-term via share buybacks.

Funds which take a defensive or wealth preservation approach can lag when markets are rising strongly.

This investment trust also has a performance fee of 10 per cent of the excess annual NAV total return of the fund above a 7 per cent hurdle. No performance fee was levied in 2015, which means that if Asian Total Return continues to perform well the 1.1 per cent ongoing charge could rise.

However, the performance fee is subject to a high water mark NAV, while the base and performance fees are capped at 2 per cent of net assets. If the trust outperforms and protects against downside, this should compensate for a slight rise in its fees.

And despite its wealth preservation stance, it has still delivered good cumulative returns, as is the case with its managers' other fund.

So if you want some Asian growth but don't fancy extreme volatility, Asian Total Return Investment Company could be the answer. Buy.

Source: Morningstar, *Schroders.

Performance

Source: Morningstar as at 11 April 2016

TOP 10 HOLDINGS as at 29 January 2016 (%)

Geographic breakdown (%)