HEAD-TO-HEAD: Blackrock vs First State

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Investment strategy

The Blackrock and First State funds belong to Morningstar’s Asia ex-Japan equity category.

The benchmark for both funds is the MSCI AC Asia ex Japan Index.

The Blackrock fund offers a mixed approach. Using the firm’s in-house quantitative analysis tool, its sole manager Andrew Swan places a macro top-down overlay onto the strategy based on the quantitative screening on multiple metrics, including price-to-book ratio.

“The core of the strategy is the experience of Swan,” said Daniels. “He sets the tone from the top and develops the entire outlook.”

“The strategy does not have a distinctive style profile. Its allocation will change about time, depending on where Swan is finding opportunities,” he explained.

Since 2016, Swan has given out an outlook on reflationary economy across Asia. The portfolio then started to tilt toward companies that may benefit from the economic growth, resulting in a bias to value stocks in the currently allocation.

The First State strategy, meanwhile, is bottom-up and buy-and-hold, primarily focusing on companies with compound growth in the Asia ex-Japan universe. It stands out with a shared long-term mind-set, according to Daniels.

“The manager has an emphasis on management quality and business integrity. To ensure this, the team organises about 1,500 meetings with company management per year,” he added.

The notable allocation of the fund is the underweighting position to China’s equities due to the managers’ concern on corporate governance.

Currently, the fund has a sizable overweighting position to private sector banks in India, such as HDFC Bank. The team is bullish on the pace of the growing market share of these lenders, which is expected to continue for at least a decade.

Based on Morningstar’s methodology on investment approach, Daniels said the First State strategy tends to be more consistent and repeatable over time.

In comparison, the First State portfolio strays substantially from the benchmark index with more active bets. Differences can be seen in geographic allocation. In top country holdings, the First State fund deviates from the index more than the Blackrock fund.

Country allocation

Source: Morningstar

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