Get the most out of Asia with Schroder Asian Alpha Plus

Because Asian equity markets are less developed and at times more volatile than some other regions, you need to access them via an experienced hand and a well-resourced approach to get the most out of them. One fund that meets these criteria is Schroder Asian Alpha Plus (GB00BDD27J12) whose manager, Matthew Dobbs, is a highly experienced equity investor who has run Asian specialist investment portfolios for more than 30 years and this fund since late 2007.

Mr Dobbs thinks that Asian markets are highly inefficient and as a result investors often fail to account for companies’ strengths and weaknesses within share prices. He uses an intensive proprietary research process to exploit this, supported by Schroders’ substantial analyst resources in the region. When selecting companies he looks for attributes including positive cash flow and strong balance sheets.

The fund's investment objective requires it to invest at least 80 per cent of its assets in Asian equities outside Japan, but it can also invest in bonds, real estate investment trusts and other funds. And Schroder Asian Alpha Plus can use derivatives or contracts to hedge positions, to potentially reduce risks. This could be particularly useful as Asian markets can be volatile. The fund also mitigates this risk via a decent level of diversification, with 58 holdings at the end of June and 5.7 per cent of its assets in cash or similar instruments – something that could allow Mr Dobbs to take advantage of falling share prices.

And its assets are spread across various countries. The fund’s largest country allocations at the end of June were China and Hong Kong, which accounted for 23.8 per cent and 22.8 per cent of its assets, respectively, although the China weighting is lower than that of its benchmark, MSCI AC Asia ex Japan index. The fund also has a good level of exposure to South Korea, India and Taiwan.

Its biggest industry bets versus MSCI AC Asia ex Japan index were an allocation of nearly 20 per cent to information technology stocks and 16 per cent to consumer discretionary stocks. But the fund had just 6.8 per cent in communication services, compared with MSCI AC Asia ex Japan index's 12.2 per cent weighting to this area.

Schroder Asian Alpha Plus has beaten MSCI AC Asia ex Japan index and the Investment Association (IA) Asia Pacific ex Japan fund sector average over three, five and 10 years. However, some of its largest holdings and recent performance serve as a reminder that this fund is not immune from regional volatility. Its two largest holdings, Samsung Electronics (SMSN) and Taiwan Semiconductor Manufacturing (2330:TAI), have endured share price falls amid the US-China trade war. And the fund fell 8.91 per cent in sterling terms during 2018, a reminder that it and the markets it invests in can be volatile.

However, the fund fell less than its benchmark index and the IA Asia Pacific ex Japan fund sector average in 2018, and has made good returns over the medium and long term. And due to its management team's depth of experience and resources, Schroder Asian Alpha Plus looks well positioned to continue exploiting Asian opportunities and outperforming over longer periods. Buy. DB