Posted inHead To Head

First State vs Schroder Asian Growth Fund

Fund Selector Asia’s Head-to-Head feature compares two funds with similar investment objectives that are managed differently.
Asia is attracting the attention of fund managers who want to diversify their portfolios amid the backdrop of geopolitical tension in Ukraine and the Middle East and downbeat economic news in some developed markets such as the US and Japan.
Two well-known funds that provide exposure to Asia (ex-Japan), the First State Asian Growth Fund and the Schroder Asian Growth Fund, have long-term track records, having been launched in 1999 and 1991 respectively. However, in our comparison, the strategies show significant differences.

Investment management style

To begin with, First State tends to focus more on growth–oriented stocks, acording to Luke Ng, vice president at FE.

“For regional and sector exposure, First State is overweight in India and Singapore, and has been gradually increasing exposure in financials in recent years.”

The highest allocation in First State’s $494.6m (£297.84m) fund was to India (as of July 31) with a portfolio weighting of 18.1%, followed by Singapore (17.4%), South Korea (16.3%), Hong Kong (15.5%) and Taiwan (10.2%).

The bets are on the financial and consumer staples sectors, which collectively account for more than half of the portfolio. Samsung Fire & Marine, Hutchison Whampoa, Cheung Kong Holdings, OCBC and DBS are the top five stock picks of the scheme.

By comparison, Schroder focuses more on export-oriented economies including China/Hong Kong, South Korea and Taiwan, with higher exposure in consumer discretionary and information technology, Ng said.

Schroeder’s S$371.5m ($297.68m, £179.25m) fund (as of 30 June) had maximum allocation to China with a 23.5% portfolio weighting, followed by Hong Kong (21.9%), South Korea (16.4%) and Taiwan (13.1%).

Export-oriented companies, including Hyundai Motor, Taiwan Semiconductor and Samsung Electronics, are among the top three holdings.
Performance Review

Both First State Asian Growth and Schroder Asian Growth are awarded an “4 Crown” rating from FE, indicating both funds have been generating meaningful alpha and steady return for investors over the past three years.

“The First State fund has a long-term consistent track record and has been a core holding for Asia exposure,” said Ajay Saratchandran, head of Asia investment management services at Manulife Financial Asia.

“First State rode through the market downturn in 2011 and is supported by an experienced team. It is a focussed, research-based portfolio which has a ‘quality’ bias, implying that there are periods when it may underperform, especially in momentum-driven markets.”

“The Schroder fund also follows a bottom up strategy, but is better suited to capturing alpha in positive markets. We would use this fund tactically when anticipating strong upward moving markets.”

While both funds invest in the same region, the stated benchmark used by each fund manager is different, adds Ng.

“The benchmark for First State includes approximately 25% in Australia, despite the fund manager being strongly underweight Australia for a long time.  For the Schroder fund, there is no Australian exposure in both the portfolio and the benchmark that the funds follow,” Ng added.


The management fees charged by the First State fund, 1.5% of the assets, is higher than that of the Schroder fund, which levies 1.125% in fees.


Investment experts said they would prefer to have allocation to both these funds in terms of overall portfolio diversification.

Saratchandran,  from Manulife, said: “My preference would be for the First State fund as a core due to its ability to generate alpha with lower risk than its peers, and tactical allocation to the Schroder Fund when anticipating positive markets.”

Ng said: “Overall, First State Asian Growth is positioned with a more domestic focus, which should benefit from continued economic growth within the region.  The fund has performed better year-to-date in 2014, partly due to an overweight position in India and [upside] from the “Modi effect.

“On the other hand, Schroder Asian Growth has an advantage if the wider global economic recovery remains on track. The fund outperformed in 2013 as equities in developed market rebounded.  Both funds have outperformed their peer average over the past three years.”

Part of the Mark Allen Group.