Top 100 Funds: Asia ex-Japan (6 Funds)

But Asian equities are a higher-risk area that includes a number of emerging markets and can be highly volatile, so you should have a long-term investment horizon and high appetite for risk if you invest in this area – especially single-country emerging markets funds.

Stewart Investors Asia Pacific Leaders (GB0033874768)

Stewart Investors Asia Pacific Leaders did not do well against MSCI AC Asia-Pacific ex Japan index over 2016 or 2017, or relative to other Asia ex Japan funds. This coincided with David Gait becoming a manager on the fund in the middle of 2015, and lead manager a year later.

However, so far this year performance has bounced back and the fund is well ahead of this index. Mr Gait also has a strong long-term performance record on other funds such as Pacific Assets Trust (PAC) and Stewart Investors Asia Pacific Sustainability (GB00B0TY6V50). 

He invests in quality sustainable companies over a long period with a strong valuation discipline, and has typically outperformed in falling markets and lagged rising markets. 

Over the long term – the timescale you should have if you invest in Asian equities – this approach has resulted in strong total returns.

“Although performance has lagged recently, we would stay with Stewart Investors Asia Pacific Leaders,” says David Liddell, chief executive of online investment service IpsoFacto Investor. “The performance shortfall may be due to lack of Chinese technology exposure and this is probably no bad thing, since many Asian funds have significant Chinese internet exposure.”

Invesco Asia Trust (IAT)

Invesco Asia has a strong record of beating MSCI AC Asia ex Japan index, but over the first eight months of this year it is behind so its short-term numbers don’t look so good.

When choosing holdings the trust’s management team, which is led by Ian Hargreaves, considers companies’ individual merits and takes a top-down macroeconomic view, looking to be flexible and take advantage of different market cycles and environments.

They target companies that look like they can achieve strong levels of capital gains and/or growing dividends, and demonstrate quality characteristics such as robust balance sheets, strong cash flows and good management teams. They also favour companies whose share prices are substantially below their estimate of fair value. 

Schroder AsiaPacific Fund (SDP)

Schroder AsiaPacific Fund has a strong record of outperforming regional indices such as MSCI AC Asia ex Japan and many of its peers. It is run by the highly experienced Matthew Dobbs, head of global small-cap equities at Schroders, who has run Asian investment portfolios since 1985.

“Schroder AsiaPacific aims to take advantage of the Asian growth story through a bottom-up, stock-picking approach,” says Ewan Lovett-Turner at Numis Securities. “The trust has consistently achieved top-quartile performance versus both open- and closed-ended funds, and is our core recommendation in the Asia Pacific ex Japan sector.”

It is also one of the largest and most liquid of the Asia investment trusts, with assets of nearly £900m and a market capitalisation of around £750m.

Fidelity China Special Situations (FCSS)

Fidelity China Special Situations has a strong record of outperforming its benchmark, MSCI China, under current manager Dale Nicholls. He invests across a broad range of companies, in particular small- and medium-sized companies with strong growth potential. The trust can invest in domestic A shares, in which it has around 11 per cent of its assets, and at the end of its last financial year it had six unlisted holdings accounting for 5.3 per cent of its assets.

On 1 July the trust introduced a variable fee structure that has reduced the headline annual fee of 1 per cent of net assets to 0.9 per cent of net assets a year. There will also be a variation fee of plus or minus 0.2 per cent based on the trust’s NAV per share performance relative to its benchmark index. The maximum fee that the trust will pay Fidelity is 1.1 per cent of net assets, but if it underperforms its benchmark the overall fee could be as low as 0.7 per cent of net assets.

Its former performance fee of up to 1 per cent has also been scrapped.

The trust’s board says the new fee will result in an overall reduction, especially compared with the years in which the performance fee was payable.

The trust’s annual administration fee of £600,000 also reduced to £100,000 with effect from 1 April.

Aberdeen New India Investment Trust (NII)

Aberdeen New India Investment Trust has a good record of beating MSCI India index in terms of its NAV returns. The trust’s managers invest in companies they think offer good value, and estimate a company’s worth by assessing quality and price. They define a company’s quality with reference to its management, business focus, balance sheet and corporate governance record. And they seek and hold companies that are run efficiently, and can tap into India’s vast long-term potential for growth.

The trust’s largest sector exposure at the end of July, at over 23 per cent of assets, was financials. Its managers prefer private sector banks because they expect private lenders to gain more ground as they have capital for growth, cleaner balance sheets and more nimble managements. It also has nearly a quarter of its assets in consumer shares.

Jupiter India (GB00BD08NQ14)

Jupiter India made a negative return over the first eight months of this year and in 2017 lagged its benchmark MSCI India – albeit with a positive return of 22 per cent. But in most other recent years it has beaten its benchmark, and is well ahead over five- and 10-year cumulative periods.

Mr Vazirani invests according to a ‘growth at a reasonable price’ style. He tries to invest over the long term in companies he thinks are the best of their kind, have the potential to grow, may benefit from country-wide structural trends and whose shares are trading at reasonable valuations.