“While [Swan’s] departure is certainly a loss to the platform, we have taken the necessary steps to prepare for succession and are well-prepared for this transition,” a Blackrock spokeswoman told FSA.
Swan was head of Asian equities for the fundamental equity division of Blackrock’s Alpha Strategies Group, and was responsible for managing several regional equity portfolios, setting regional equity investment strategy and developing Blackrock’s Asian investment platform. He was also a leader of the US firm’s global emerging markets team.
After 15 years in Hong Kong, Swan “has decided to return to Australia to manage assets at a boutique firm,” according to the spokeswoman.
Swan, who had previously spent 17 years at JP Morgan, managed Blackrock’s Asian Dragon and Asian Growth Leaders funds, with co-managers Alethea Leung and Emily Dong respectively.
In his report on the Asian Dragon fund in June 2019, Morningstar’s Andrew Daniels described the bronze-rated Swan as a “talented and experienced lead manager” and “an astute investor who has posted impressive returns throughout his career”.
However, Daniels added that “importantly, Swan — who underpins our conviction here — remains the lead manager and has no plans to step away”.
Daniels told FSA today that the Asian Dragon fund’s bronze analyst rating is now under review, describing Swan’s departure as “a significant loss”.
Morningstar is also concerned about other recent exits, including Helen Zhu, co-manager of three China equity funds, who left last July, and is uncomfortable with flexible style of Blackrock’s Asia ex Japan portfolios, which means “performance is too dependent on individuals and returns are unpredictable”, said Daniels.
The $3.97bn Asian Dragon fund has a three-year cumulative return of -3.43%, underperforming its benchmark MSCI AC Asia ex-Japan index (4.11%), but better than the sector average (-6.9%) of funds authorised by Hong Kong’s Securities and Futures Commission, according to FE Fundinfo data.
The 18.6% annualised volatility of the fund during the period is higher than its peers (16.22%) and its benchmark (17.41%).
At the end of February, the fund had overweight allocations to information technology, communications, property and healthcare, and a large underweights to financials (-8.1 percentage points lower than the benchmark). Geographically, its biggest overweight was India and largest underweight was Taiwan, according to the fund’s factsheet.
The $1.96bn Asian Growth Leaders fund has had an even tougher time, posting a -9.87% three-year cumulative return, but with lower volatility (17.78) than the Asian Dragon product.
It had big bets on consumer discretionary (23.56% vs 15.28% in the index) and communications (20.78% vs 12.22% in the index), and underweight exposure to financials, information technology, property, utilities, materials and consumer staples, according to the fund’s 29 February factsheet. Its major country underweights were Taiwan and Korea, and most significant overweights were Singapore and Indonesia.
Intuitive approach
According to Morningstar’s Daniels, Swan executed a style-agnostic approach, blending top-down and bottom-up research, to fill the portfolio with 50 – 80 stocks.
“While the approach is reasonable overall, its success is heavily reliant on Swan’s intuition and experience, and its doesn’t have a predictable return profile, which could make it difficult to own,” argued Daniels.
Yet, both the Asian Dragon and Asian Group Leaders funds have struggled in recent turbulent markets — including during the March turmoil — underperforming its benchmark over one-month, three-months, six-months and 1-year.
However, Swan’s long-term performance has been significantly stronger.
Since the start of his tenure at the Asian Dragon fund on 30 September 2011, Swan generated 115.36% cumulative return, well in excess of its benchmark (93.85%) and the sector average (67.2%), according to FE Fundinfo.
“[Swan’s] performance over his nine years at Blackrock in his key strategies Asia Dragon and Asia Growth Leaders has been industry leading. Much of this has been driven by stock selection, which shows the power of the analyst team and investment process, none of which will change on his departure,” said the spokeswoman.
“While we acknowledge more recent disappointing performance on retail funds, [Swan’s] departure was not performance related, but merely a personal choice as to location,” she said.
“The team has been developing leaders at several levels and will use this opportunity to give them additional responsibility. There will be no changes to the investment process,” she added.
Gordon Fraser (who Morningstar’s Daniels rates highly) and Stephen Andrews will become co-heads of global emerging market equities, while Sam Vecht will become head of emerging Europe, frontiers and alternative strategies.
They will all report to Belinda Boa, chief investment officer for global emerging markets, according to the spokeswoman.
Blackrock GF Asian Dragon Fund and Blackrock Asian Growth Leaders Fund: top 10 holdings
| Asian Dragon Fund |
Weighting |
Asian Growth Leaders Fund |
Weighting |
| Samsung Electronics |
6.91% |
Alibaba |
8.45% |
| Tencent |
6.84% |
Tencent |
8.40% |
| Alibaba |
6.37% |
Singapore Telecom |
4.97% |
| Taiwan Semiconductor |
4.82% |
Samsung Electronics |
4.88% |
| Bharti Airtel |
2.73% |
Jiangsu Hengli Hydraulic |
3.94% |
| Singapore Telecom |
2.24% |
NC Soft |
3.56% |
| Hon Hai Precision |
2.24% |
BOC Hong Kong |
3.55% |
| Yum China |
2.08% |
Hon Hai Precision |
3.54% |
| CK Asset |
2.04% |
Tech Mahindra |
3.48% |
| China Mobile |
2.03% |
Meituan Dianping |
3.35% |
Source: Fund factsheets, 29 February 2020
Blackrock GF Asian Dragon Fund and Blackrock GF Asian Growth Leaders Fund vs benchmark and sector average
