Schroder Asian Total Return (ATR)
19/03/2024
Results analysis from Kepler Trust
Intelligence
Schroder Asian Total Return
(ATR) has released its financial results for the year ending
31/12/2023. Over the year, the trust saw its NAV increase by 8.8%
on a total return basis, compared to the benchmark return of 1.3%.
The AIC sector average delivered a total return of
-0.5%.
Performance over the year has
been primarily driven by stock selection, with the managers
extracting positive attribution from 10 of the 12 countries in the
index. Firstly, the managers' decision to avoid many Chinese
companies delivered good relative returns. Secondly, the decision
to allocate to a number of technology stocks also delivered strong
performance.
Stock selection in India was
a small relative detractor, but still contributed significant
absolute returns. This was offset with performance elsewhere, and
furthered long-term cumulative returns.
The trust announced a 4.5%
increase in the dividend to 11.5p which indicates a prospective
yield of c. 2.5% based on the current share price (as at
13/03/2024). The dividend was supported by revenue reserves which
remain significant.
The discount narrowed
slightly over the year to 4.6%. The board have been very active
with share buy backs. In total, over 7.5% of the initial share
capital was bought back over the course of
2023.
Gearing has ranged between
4.6% and 10.3%, with an average level for the year of
7.9%.
Chair Sarah MacAulay
commented on the trust's strong performance in a challenging period
by saying "our unconstrained approach to investing in Asia has not
only delivered good returns but also provided a degree of capital
protection in difficult market conditions"
Kepler View
Schroder Asian Total Return
(ATR) is a unique offering in the AIC Asia Pacific sector. Managers
Robin Parbrook and King Fuei Lee take a benchmark agnostic approach
that allows their stock selection capabilities to generate alpha,
as well as using hedging strategies to help dampen
volatility.
We believe the 2023 results
represent a return to form and Robin and King Fuei. Their best
returns came from stock selection in China, including the decision
to avoid the big e-commerce names. Conversely, the names they did
hold performed well and delivered significant
alpha.
Stock selection alpha has
been prevalent throughout the portfolio including in weak markets.
Their tech holdings also rose significantly following increased
demand which has been a positive tailwind.
Despite the excellent
performance, the shares have traded at a persistent discount albeit
the level is considerably narrower than the average of the peer
group. The board has been active in trying to mitigate this and as
such, we believe the current discount represents an attractive
entry point for long-term investors.
The managers believe that
many companies in the region are in good shape, which not only
offers them a good foundation from which to deliver growth, but it
also supports the dividend outlook for the
region.
The portfolio continues to
have an underweight allocation to China, and is overweight more
developed Asia Pacific countries. The managers have considerable
experience to support their top-down overlay, which we believe can
help mitigate the worst of the region's risks. As such, we believe
ATR may appeal to investors who maintain a cautious outlook on
China, but still wish to capture many of Asia's exciting growth
trends.
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