HEAD-TO-HEAD: First State versus Schroders

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Manager review

Share has confidence in the managers of both the First State and Schroders funds.

First State’s Martin Lau has led the fund since 2002 and manages other Greater China and Asia-Pacific equity mandates, which have also delivered good results, according to Share. Co-managing the fund is Richard Jones, who joined the firm in 2010 and is also managing other Asia-focused strategies.

Turning to the Schroders fund, Share said that the lead manager is Toby Hudson, who has been responsible for the product since 2008 and has been with the firm for 27 years. Like the First State managers, Hudson also manages other Asia-focused mandates.

“We like the portfolio managers of both funds a lot. They have been managing the funds in multiple market cycles and they have always impressed us with their insight and they know their holdings very well,” Share said.

However, there is a huge difference when it comes to analyst turnover and investment culture.

The First State managers are supported by a 21-member team covering the region. Although the team lost three members this year, it has been stable for a long time.

Schroders, on the other hand, lost nine Asia-focused analysts since 2017, according to Share.

However, she noted that the Asia-focused team remains huge, with 29 members.

“Although the Schroders team had more turnover, one area it has an edge over the First State fund is its huge team as the firm has been building out their A-shares capability.

“While this may not directly affect Hong Kong equity funds, we feel that in a broader Greater China context, this would be a competitive edge, especially since more global investors are looking at the A-share market with the MSCI inclusion.”

In terms of investment culture, Share prefers First State’s.

She explained that within the firm, around 50% of the portfolio and analysts’ bonuses are invested in the funds that they manage.

“At Morningstar, we advocate investment teams where the team’s interests are aligned with the investors.”

While the portfolio managers of Schroders have the possibility to invest in their own funds, this is more of an option for them and is not embedded in the firm’s culture, she added.

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