Schroder Asian Total Return (ATR) aims to benefit from the impressive growth potential in Asian stock markets. At the same time, the managers seek to limit the equally impressive volatility that stock markets in the region have exhibited historically.
Managers Robin Parbrook and King Fuei Lee have built an investment process on a foundation of highly active, valuation-sensitive stock selection. They overlay this with the use of quantitative economic models to warn them of impending market corrections in the underlying countries, which allows them to apply hedges to the portfolio to limit the exposure to the downside.
The managers take a highly active, benchmark-agnostic approach, which they view as crucial in Asian markets. The valuation element to the stock-picking and the hedging strategy have helped the trust produce one of the highest upside/downside capture ratios in the sector over the past five years.
At the same time, the trust has handsomely outperformed the index and peer group under the strategy implemented by Robin and King Fuei since March 2013. Over the past five years, the trust’s NAV total return has been 110%, while the average trust in the AIC Asia Pacific ex Japan sector has returned just 76% and the index even less – 71.1%. The trust has also displayed NAV volatility significantly below the sector average over the period.
Although the trust has a total return objective, the managers view dividends as a sign of a well-run company and have been increasing their exposure to yielding companies as their view on the marker becomes more bearish. As a result, the trust’s dividend growth has been substantial in recent years, and the shares now yield 1.7%.
Schroder Asian Total Return has traded on a premium since July 2017, currently 1.3%, and has been regularly issuing shares. The trust has a performance fee charged on absolute rather than relative returns.