The Adviser Fund Index panellists are upbeat on the long-term outlook for Asia Pacific excluding Japan. According to last month’s mid-season questionnaire, eight out of 16 respondents expect Asia Pacific to outperform the other major equity regions over the next five years.
Ben Willis, investment manager at Whitechurch Securities, and Kypros Charalambous, investment manager at Gerrard Investment Management and an associate director of Barclays Wealth, both selected Asia Pacific as their preferred equity region.
Willis says rising domestic demand has allowed Asia Pac-ific economies to decouple from America and he points to stockmarket resilience during the recent volatility.
But while Charalambous agrees that the growth of middle-class spending has helped, he says indices in the region have lower weightings to financials, making them less sensitive to the sub-prime crisis.
Charalambous also warns that the region remains dependent on American consumption. As a result, he has “tempered” his enthusiasm for Asia Pacific in the short term.
Within Gerrard’s portfolios, he has reduced his exposure to closed-ended funds and he recently sold out of the Schroder oriental income investment trust as its discount narrowed.
Charalambous has moved into a combination of open-ended portfolios, structured products and iShares exchange-traded funds which focus on Asia Pacific.
He holds Aberdeen’s Asia Pacific Oeic as a core investment and the fund also appears in Gerrard’s AFI selections across all three indices.
Charalambous says: “We use the Aberdeen fund bec-ause it is fairly conservative. We like the long-term Asia Pacific story and do not want to gear by using an aggressive manager.”
Willis holds First State Asia Pacific leaders in his Agg-ressive AFI selection and says he was a long-term supporter of Angus Tulloch’s Asia Pacific portfolio, which launched in 1988.
When Tulloch unveiled Asia Pacific leaders in 2003, he says investing was a “no-brainer”. Asia Pacific, which was added to the AFI in May, has returned 214 per cent over the last 10 years, according to data from Financial Express.
Alongside the First State fund, Willis also holds Gartmore China opportunities. Charlie Awdry took on the £500m portfolio last year following the departure of Phi-lip Ehrmann to Jupiter Asset Management.
Willis has further Chinese exposure in his Balanced AFI selection through a holding in Allianz’s Bric stars fund.
Overall, 10 funds from the Asia Pacific excluding Japan sector appear in the AFI. The Gartmore fund has produced the biggest return over the last year followed by Martin Currie Asia Pacific. The remaining eight portfolios have all underperformed the sector average.
The Aggressive, Balanced and Cautious indices have respective allocations of 11 per cent, 7 per cent and 2 per cent to Asia Pacific equities.
The panellists will be able to change their fund selections and weightings at the next rebalancing point, in November.