manager of aberdeen asia pacific and st james's plACE FAR EAST steers funds up 2.6% and 2.2% respectively against average fall of -6.47%
Only Hugh Young has managed to deliver positive returns over one year from the Asia including Japan sector and all funds have lost money over three years.
Young, manager of the Aberdeen Asia Pacific and St. James's Place Far East portfolios, has steered the funds up 2.6% and 2.2% respectively over the 12 months to the end of October, compared to a sector average fall of 6.47%.
Over three years to the end of October, funds in the sector have on average posted losses of 26.57%, with Young's Aberdeen portfolio a full 9% ahead of its nearest rivals, having fallen 9.67% over this period.
The £29.5m Aberdeen Asia Pacific Unit Trust returned 3.95% over the 12 months to the end of October 2000 and a loss of 15.31% over the 12 months to the end of October 2001.
Young takes a bottom-up view, seeking companies with good businesses that generate decent returns, have solid finances, management with a good reputation and a belief in adding shareholder value.
'Once we have bought in, we generally hold for the long term,' he said. 'Portfolio turnover is very low'
Young said a large underweight in Japan, around 20% compared to an index weighting of more than 60%, contributed to outperformance over the most recent 12-month period.
'We are unlikely to add much to our Japanese weighting until we see meaningful signs of reform and a change in the way most Japanese companies are run,' he said.
Young believes the authorities have failed to tackle the underlying problems of the Japanese economy properly. He said there is a lack of Japanese companies trading at attractive valuations and run for the benefit of outside shareholders and more long-term growth potential in the rest of Asia.
Overweights in a number of other Asian countries, notably Korea and Thailand, also boosted returns in the most recent period. Stocks that made large contributions included Korea's Kookmin Bank and Samsung Electronics, as well as some smaller Hong Kong equities.
The underweight in Japan also boosted performance over the three years to the end of October, Young said, although overweights in Malaysia, Thailand and Korea made a larger contribution.
Smaller Hong Kong stocks and Singaporean banking stocks, which benefited from takeovers in the sector, also helped over the period, he said.
'Looking forward, we are optimistic, although, given the tough economic environment worldwide, it is difficult to see a trigger for Asian or world markets in the next few months,' Young said.
'Longer term, we feel Asia will continue to see faster economic growth than developed economies and, on the back of this, we feel regional equity markets still have a lot of potential.'
Young noted Asian markets are still at relatively low levels in historical terms and didn't experience the excesses seen by many western markets, so plenty of companies are currently offering good value.
Invesco Perpetual's AA-rated Pacific fund, managed by Stuart Parks since August 2001, has slightly underperformed its peers over three years but outperformed in the past two discrete years. The fund is down 27.44% over three years versus a sector average loss of 26.57%.
Over one year, the fund has provided investors with greater capital preservation than the sector average, down 1.4% compared to the average loss of 6.47%. In the 12 months from November 2000 to October 2001, it saw a negative return of 20.7%, while the sector posted a loss of 24.08%.
Stock selection is very much a bottom-up process with a blended style incorporating the growth at a reasonable price and catalyst for change or value methodologies.
Parks manages asset allocation and the Southeast Asian equity quotient of the fund, with Invesco's head of Japan, Paul Chesson, managing the fund's Japanese stock list.
A quantitative screen is used to boil down the universe of Asian stocks, some 7,000 before Japan is considered, into a more manageable 650 names.
Stocks are then filtered through an earnings and valuation cycle matrix that identifies stocks on attractive valuations and with positive catalytic drivers. Along with fundamental research and analysis, this enables the house to devise a 100-strong buy list.
These quants screening processes have been made more stringent over the past six to nine months, which has filtered through to the fund's performance this year.
Since taking the helm of the fund, Parks has upped its weighting in financials. Alfred Ho, chief investment officer for Invesco Asia, said the banking sector has undergone consolidation throughout Asia and has been cleaned up considerably in Korea, Malaysia, Indonesia and Singapore. The fund is now 24.9% invested in financials.
While Japan, which comprises a third of the fund, remains a value play, Parks is growing increasingly bullish on Asia ex-Japan and is favouring Korea, Hong Kong and the defensive Australian market.
He said: 'The region now enjoys current account surpluses, freely floating currencies, substantial foreign reserves and low inflation. At the corporate level, falling debt and cost-cutting programmes are boosting profitability.'
Over three years to the end of October 2002, the Schroder Far East fund has underperformed the sector significantly, posting a loss of 35.62% compared to the sector average fall of 26.57%.
However, its performance over one year has been more encouraging, with Richard Sennitt taking over management of the fund in November last year from Elizabeth Soon.
Over one year to the end of October, it is ranked seven out of 12, returning a loss of 7.78% compared to the sector average fall of 6.47%.
While the fund is positioned with a modest recovery bias in the near term, Asian equity prices are likely to remain vulnerable to weak newsflow in the US, according to Sennitt said,. He will use this weakness to increase positions in some of the better quality stocks, which he believes have been oversold by the market.
Sennitt said: 'The fund is generally invested in countries and sectors that are sensitive to economic recovery.'
Square Mile’s series of informal interviews
Alzheimer’s is the most common cause of dementia
Total of 72 accredited firms
23% fall since Q1
Achievements, charity work and other happy snippets