China may be coming off the boil, but given its size and importance it’s still worth having exposure to Asia. The trick is to pick a high-quality, reliable fund manager.
Not only has the Edinburgh Dragon Trust (LSE: EFM), part of the Aberdeen Asset Management stable, “massively outperformed its benchmark, MSCI AC Asia ex Japan, index, both in terms of share price and net asset value over one, three and five years”, says Investors Chronicle, but it has also beaten “most of the trusts in the Asia Pacific ex-Japan investment trust sector over these periods”. The trust, worth £484.8m, has delivered returns of 13.5% over one year, 48.2% over three and 72.3% over five years, says Trustnet.com.
Charging a fee of 1.2%, it’s run by Andrew Gillan. Aberdeen’s Asian team is headed by the renowned Hugh Young. Meeting company management is an important part of their stock selection process, as is picking quality names.
According to Szymon Idzikowski, analyst at Morningstar, who rates the trust as one of the best choices for Asian equity exposure, this approach has “translated into excellent results in the short and long term while keeping risks firmly in check”. A stock turnover rate of below 10% a year also helps reduce costs.
Trading at around a 10% discount to its net asset value (the total value of the underlying shares in the portfolio), the trust is underweight in China, with 24% of holdings in Hong Kong, 20% in Singapore and 14% in India.
Despite concerns about Asian growth forecasts, Gillan reassures investors that “regional economies are still in better shape relative to advanced Western economies, with growth expected at above 6% for 2012”.
Edinburgh Dragon Trust top ten holdings
| Name of holding | % of assets |
|---|---|
| Samsung Electronics Pref | 5.0 |
| Jardine Strategic | 4.4 |
| Oversea-Chinese Banking | 4.4 |
| Standard Chartered | 4.1 |
| Taiwan Semiconductor | 4.0 |
| HDFC | 3.9 |
| ST Engineering | 3.4 |
| City Developments | 3.3 |
| Infosys | 3.3 |
| China Mobile | 3.1 |