Morningstar’s flagship select list has singled out 5 Asia ex Japan equity funds as its best fund ideas for open-ended markets in Hong Kong, Singapore and Taiwan.
Funds from Fidelity, Schroders, Federated Hermes, FSSA and JP Morgan Asset Management have been picked by Morningstar as ‘best of breed’ funds investors can consider for an Asia ex-Japan equity exposure.
Samuel Lo, associate director of manager research at Morningstar, told FSA in an interview that funds on the select list were picked to give fund selectors a choice between investment styles, as well as product providers.
Lo also said he wanted to highlight products of lesser-known fund houses his team believe have investment merits.
Below are the five actively managed funds on Morningstar’s Flagship Select List for Asia for Q1 of 2025, which will be reviewed on a quarterly basis.
Schroder ISF Asian Opportunities
This fund was Morningstar’s top pick for core exposure to Asia ex Japan equities. It is run by Toby Hudson, who runs a high-conviction portfolio of 40 to 60 quality growth stocks.
While Hudson primarily focuses on high-quality compounders, Morningstar analysts praised the fact that “he has also at times been pragmatic about having small positions in contrarian or recovery ideas, which helps the portfolio better navigate different market environments”.
Federated Hermes Asia ex Japan Equity
This fund was another fund that made the select list, with a more value tilt. It is run by Jonathan Pines, who runs a high conviction, benchmark agnostic portfolio of 45 to 60 holdings.
This was one fund that Lo highlighted as lesser known in the region, but as a “a more contrarian and value orientated, it brings something quite different to the table.”
JPM Asia Growth
This fund was selected for its slightly different approach to growth than the previous two. It has 88 holdings and is managed by Mark Davids and Joanna Kwok.
“This is a higher growth strategy,” Lo said. “It can be seen in its performance which can be quite volatile – however on a risk-adjusted basis investors are well compensated, but it may not be for faint-hearted investors.”
FSSA Asian Growth
This was another quality-focused fund that made the select list. It is managed by Rizi Mohanty, who has just taken over as lead manager from Richard Jones who stepped down to retire last month.
Lo emphasised this strategy’s very strong focus on quality. He said: “If you look at volatility and downside resilience it is very strong, but if you look at benchmark relative performance it can be quite lumpy.”
“They don’t care about the benchmark, and care more about minimising losses which they define as permanent loss of capital,” he explained.
Fidelity Sustainable Asia Equity Fund
This was yet another quality growth fund that made the select list. It is managed by Dhananjay Phadnis, with 50 to 70 names in the portfolio.
The strategy invests in businesses trading at below their estimate of intrinsic value and out-of-favour stocks with turnaround catalysts.
Lo said: “This has a more explicit sustainability angle to it, and they formalise that process, which is something some investors may care about.”
The select list also included a passive fund from BlackRock as an option for investors looking for a low-cost, passive exposure to Asian equities, namely the iShares Core MSCI Asia ex Japan ETF.
