Launched in 1994, this £67m fund has been managed by the trio of Ian Heslop, Amadeo Alentorn and Mike Servent since December 2011.
The vehicle aims to achieve long-term capital growth through the active management of a diversified portfolio of currently 171 holdings principally traded on Asian and Australasian stockmarkets.
The managers use the same investment process for the Asia Pacific fund as they do on the Old Mutual North American Equity, Global Equity Absolute Return and Global Equity funds.
Mr Heslop explains: “The style rotation is very endemic in all markets. You have periods where value works, where it doesn’t; where growth works, where it doesn’t; where momentum works, where it doesn’t. I think a lot of active managers struggle to beat benchmarks because they are too style concentrated.”
He points out these funds “are designed to have exposure across multiple styles, so we are nicely diversified across styles, reducing the up and down return that you get with concentrated style exposure and downside risk”.
But rather than focus on the macroeconomic factors, the team takes a view on the current type of market and then uses that perspective to decide the type of style it wants. Mr Heslop notes: “It’s not a macro call, which has been quite helpful in the past 12 months. If you look at the macro itself, the big driver of Asia-Pacific has been: is China slowing? Is it not? But we’ve had huge turns in sentiment that have been the main driver of equity market-type for us.
“Macro has taken a back seat and it helps to have the investment process that we have, which is to not try and forecast the macro. What we’re trying to do is say, ‘okay, there is data out there that investors will take in and act on’. Our job is to try and understand how they’re acting. We don’t explicitly have a macro forecast, but implicitly we capture it by measuring the type of market that we’re in.” The process itself is constantly evolving, although the manager notes “the bones of it” haven’t changed.
The R-accumulation share class sits at a higher risk level of six out of seven, while the ongoing charges are 1 per cent, the key investor information document shows.
For the five years to February 26 the fund has delivered 31.1 per cent compared with the Investment Association Asia-Pacific ex Japan sector’s average return of 10.1 per cent and the MSCI AC Asia-Pacific ex Japan index’s gain of 9.5 per cent, data from FE Analytics shows. It has also outperformed both the sector and the index across three- and 10-year periods, though its 12-month performance has been less appealing, with its 10.3 per cent loss remaining on par with the sector’s average deficit of 10.1 per cent but beating the index’s fall of 13.1 per cent.
Mr Heslop notes: “[We’ve been a] little bit down on sector positioning – the main returns have come from stock selection in materials and consumer staples. Approximately 90 per cent of returns come from stock selection within sectors. We don’t do any country selection particularly.”
The manager points out there are some factors that are affecting the portfolio, and notes that roughly since the first quarter of 2015 there has been quite a ‘risk-off’ environment, which has meant the team has focused more on quality exposure and less on value stocks.
“What we’ve seen recently – and we’re not overreacting to this – is that we’re starting to nibble away again at value. We’re just neutralising the defensive stance that we’ve had for a period of time,” he explains.
| VERDICT - Martin Bamford, chartered financial planner and managing director, Informed Choice |
| Ian Heslop heads up the quantitative strategies team at Old Mutual, which is responsible for this fund. It has delivered a first-quartile return over the past three years. This vehicle offers a nice way to access equities in the region, with a diverse portfolio of stocks and competitive ongoing charges of 0.93 per cent [on the U1 share class], which represents good value for an actively managed portfolio of Asian equities. |
Meanwhile, Mr Heslop highlights the rise in volatility in Asia as an additional factor that can affect trend or momentum stocks that perform well, and which could have a chance of breaking down in periods of higher volatility.
“This year we’ve started to take a little bit of the momentum-type stocks out of the portfolio, with the view that it may not necessarily happen but it is likely that in the type of environment where volatility continues to rise, you run the risk of having negative returns to momentum. The momentum unwinds and there’s a big snap in the markets.”
