HEAD-TO-HEAD: Aberdeen Standard versus First State

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Source: FE Fundinfo. Three-year cumulative returns in US dollars.

Performance

The First State fund has performed better than the ASI fund over most time-periods, generating superior risk-adjusted as well as absolute returns.

It has posted a 37.16% cumulative return over three years with annualised volatility of 12.69%, while achieving alpha of 5.98, according to FE Fundinfo. Its returns are less volatile than both its benchmark (15.53%) and its sector average (13.68%), and it has a Sharpe ratio (a measure of risk-adjusted returns) of 0.53.

In contrast, the ASI fund has slightly underperformed the benchmark it shares with the First State fund, the MSCI AC Asia Pacific ex-Japan index, with a cumulative return of 22.05% over the same period, compared with 23.3% by the index. However, it has also generated alpha (1.04) and has a positive Sharpe ratio (0.14).

“Both funds tend to do well in market uptrends, but the First State product delivers even during downturns,” said Cheung.

“First State successfully finds undervalued stocks and remains committed to them over the long-term, which partly explains the fund’s strong performance,” he said.

For instance, its top holding, Taiwan Semiconductor Manufacturing, has been in the portfolio for at least 10 years.

The other key element of the fund managers’ philosophy that underpins performance is the quality of the companies themselves; in particular, the strength of their balance sheets, according to Cheung.

Solid companies with cheap stock valuations are an appealing combination for emerging market investors, he added.

The ASI fund also buys high quality companies, but with a greater focus on their industry leadership credentials rather than the strength of their balance sheets, according to Cheung.

“As a result, performance tends to suffer in weak markets, such as in 2018 and 2015,” he said.

Discrete annual performance

 Source: FE Fundinfo. Annual returns in US dollars.

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