Head To Head

HEAD-TO-HEAD: First State versus Schroders

FSA compares two Hong Kong equity products: the First State Hong Kong Growth Fund and the Schroders ISF Hong Kong Equity Fund.

by Francis Nikolai Acosta 6 December 201910 November 2020

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The First State and Schroders funds versus their benchmark indices and sector in Hong Kong. In US dollars. Source: FE Fundinfo.

Performance

Share expects the performance of the funds to be similar because both have a quality focus in their investment process.

However, she believes that the First State fund has better downside protection when markets are falling.

“The Schroders fund, because of its quality focus, would also have a downside protection characteristic, but it would be stronger on the First State fund.”

Discreet annual performance (%)

Fund / sector	YTD 2019	2018	2017	2016	2015	2014
First State Hong Kong Growth I Acc USD in US	11.18	-7.77	42.97	3.49	-2.23	-4.15
Index : MSCI Hong Kong GTR in US	4.54	-7.83	36.17	2.27	-0.54	5.07
Schroder ISF Hong Kong Equity D NAV HKD in US	8.43	-15.11	48.89	-0.56	-6.13	3.15
Index : FTSE HongKong GTR in US	6.51	-10.18	36.72	3.71	-3.64	3.28
Sector : HKM Equity Hong Kong TR in US	4.41	-13.52	38.52	-1.53	-5.95	2.8

Source: FE Fundinfo. In US dollars.

Share explained that benchmark-awareness is one reason why the Schroders fund’s downside protection is not as strong as First State’s.

For example, the Schroders fund was not able to perform as strongly as the First State fund year-to-date.

“Unfortunately, the property stocks that the Schroders fund holds have not done very well this year due to political instability and poor retail sales, which hurt the fund,” she said.

Given that the First State fund has better downside protection, she expects that it is the less volatile of the two. She also noted that First State fund has a better risk/reward profile given its higher Sharpe ratio.

Three-year annualised volatility and Sharpe ratios

Fund / Index	Volatility	Sharpe
First State Hong Kong Growth I Acc USD in US	16.66	0.58
Index : MSCI Hong Kong GTR in US	15.11	0.29
Schroder ISF Hong Kong Equity D NAV HKD in US	17.04	0.38
Index : FTSE HongKong GTR in US	15.18	0.26
Sector : HKM Equity Hong Kong TR in US	15.19	0.18

Source: FE Fundinfo

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