HEAD-TO-HEAD: First State vs Schroders

123456

The First State fund’s core investment philosophy is to find quality companies which pay above-market dividends, instead of high-yielding stocks, Share noted.

Hence, dividend yield for this fund reached 2.82% as of November-end, versus 4.83% for the Schroders fund, and 2.82% for their benchmark, the MSCI AC Asia- Pacific ex-Japan index.

This approach also leads to an underweight in Korean equities, she said.

“The [First State] team defines risk as losing money. Corporate governance of a firm is of utmost importance.”

One of the examples is the underweight of Samsung Electronics, in which the controlling shareholder Samsung Group has been recently involved in a corruption scandal linked to the nation’s president.

“At our November 2016 meeting, [fund manager] Martin Lau said despite his constructive view on the company’s OLED and memory businesses, he had some reservations regarding its corporate governance.”

Top five country exposure (as of Nov 30)

Top five sector exposure (as of Nov 30)

Source: Morningstar

The Schroders fund, on the other hand, is more benchmark-aware and yield-focused, Share pointed out.

“The investment universe is divided into three categories: dividend cows which provide steady dividend stream, dividend growers hopefully driven by earnings growth, and dividend surprises, which pay very little or no dividends now, but might improve overtime.”

The latter accounts for roughly 10% of the portfolio and the team sees opportunities in countries such as Korea. “After the Korean government’s push to boost shareholder returns two years ago, companies have improved the payout ratio or engaged in share buybacks,” Share explained.

The dividends cows and growers, meanwhile, are maintained largely at equal weights to minimise volatility across full market cycle, she added.

123456