Schroders’ Robin Parbrook has said plans to protect his Asian Total Return investment trust from market falls did “not work as well as hoped”.
In annual results for the year to December 31, Mr Parbrook said he and co-manager King Fuei Lee held put options to “provide against global macro risks”.
A put option gives the holder the opportunity to sell an underlying security at a specified price and becomes more valuable as the underlying stock depreciates.
The put options in the trust were mostly on North Asian markets and Australia though and the manager said with market falls mostly in other market “it was impossible to hedge against market weakness”.
“On a more positive note, the Australian dollar hedge was profitable and, with put prices relatively low, there was only a small drag on performance from the hedging strategies,” Mr Parbrook said.
The trust delivered a share-price loss of 3.4 per cent in 2013, while the MSCI AC Asia Pacific ex Japan index (sterling adjusted) fell by 1.6 per cent. However, chairman David Robins said the “excellent long-term track record” of the managers meant the trust saw its shares re-rate.
He said the trust’s discount – the amount its share price trades below the net value of its assets – narrowed from 8.1 per cent to 3.2 per cent during the year.
Elsewhere, the manager said the bulk of the transactions for 2013 were in March when Schroders took on the trust from Henderson Global Investors.
Mr Parbook said the initial positioning focused on “pockets of opportunity” in Hong Kong and Singapore property stocks, banks, retail construction and conglomerates in the Association of Southeast Asian Nations, which includes the likes of Thailand, Vietnam and the Philippines.
Other than these new holdings, the manager said “two structural changes” were made as set out in the agreement when it moved to Schroders.
These were to include some small and mid cap companies and to implement a derivatives strategy.
