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Scots manage one of the best Asia equity funds

Asia Equity Funds: Stewart Asia Pacific Leaders one of the best

Like most Asian equity funds, Stewart Asia Pacific Leaders is measured by the MSCI AC Asia-Pacific ex-Japan benchmark. It is one of the few funds that has benefited most from the growth figures of the Asian economic area. Measured in terms of total return, the fund has outperformed the market by an average of 13% per year over the past 10 years. By comparison, the category stagnated over the same period, and the index even declined slightly.

Investing in the Asia consumption story

In China, South Korea, India, and southeast Asia, there is a young, up-and-coming middle class with growing consumer power. In numerous emerging Asian markets, there is a backlog demand in terms of both technology and infrastructure. As such, investors can hardly ignore the Asian continent. It is home to the largest number of consumers in the world. Six of the world’s 10 most populous countries are located in the region. European investors in particular have not yet given the Asian continent its corresponding space in their portfolios. Even in equity and bond indices, Asia’s weight is nowhere near on par with its future significance.

There is no end in sight for economic growth in Asia. The prosperity gap with industrialized countries is still considerable. Nevertheless, Asia already accounts for one-third of global economic output. Contrary to the usual fund classification however, Asia-Pacific is not a homogeneous region. The differences between individual countries are too great. The upturn is not limited to China, which will soon become the world’s largest economy. India, in particular, is still a widely ignored market by international investors. And the ASEAN region is one of the fastest-growing regions in Asia.

Stewart Investors relies on a blend investment style

Stewart Investors is a brand that manages its own funds under the umbrella of the Australian fund company First State Investments. The Stewart Investors team is less benchmark-oriented and more focused on its own specific investment approach. The investment style consists of a mixture of value and growth strategy. The guiding principle is that, in Asia, it is possible to find valuable companies that are also growth-oriented. Thus, the investment process involves identifying both  undervalued and high-growth stocks. The strategy is more company-related and not rigidly aligned with traditional criteria. This investment approach is also referred to as a ‘blend fund’.

Fund managers are David Gait and Sashi Reddy, who have been making investment decisions for the fund since 2015 and 2016 respectively. Gait has been with Stewart Investors since 1997. He initially developed strategies for the fund, and has now been managing the fund for 11 years. Reddy has been with Stewart since 2005, and is a senior portfolio manager specialising in the Indian subcontinent.

Stewart Asia Pacific Leaders has been on the market since the first of December, 2003. With a fund volume of over £7.65 billion, it is one of the largest in its category. Stewart Asia Pacific Leaders contains a total of 41 individual stocks, with a focus on India, Taiwan and Japan. The leading sectors are non-cyclical consumer goods, technology stocks, financial services and healthcare. Top holdings include Tata Consultancy Services, the Japanese Unicharm Corp., Mahindra & Mahindra, as well as Tech Mahindra from India, and the Australian CSL. The fund invests exclusively in large caps and medium-sized companies.

An investment fund for Asian growth

Stewart Investors manages one of the most interesting equity funds in Asia. It is recommended for long-term oriented investors. Over 10 years, its increase in value has far outperformed Asia-Pacific ex-Japan equity funds. The fund shows comparatively low volatility. It invests in large and medium-sized companies with a market capitalisation of at least $1 billion. The growing middle class, especially in China and the ASEAN countries, offers investors enormous growth potential.