Asia remains home to world-leading technology innovators, semiconductor manufacturers, and consumer digital platforms.
However, while many investors recognise the region's compelling long-term growth story, multiple challenges, such as rapid shifts in sentiment, geopolitical uncertainty, and concentrated exposure to single narratives, such as AI, can make investors wary of investing in the region.
That’s where Robin Parbrook and Lee King Fuei, Portfolio Managers of the Schroder Asian Total Return investment trust, believe they have the edge.
Best stock ideas
Schroder Asian Total Return’s portfolio is designed around the principle of high-conviction stock selection. The managers look for companies that are well-managed, with strong business models as well as a competitive advantage (a.k.a.Warren Buffet’s Moat), that are trading at valuations that do not fully reflect their long-term growth potential.
The trust is benchmark agnostic, meaning stock selection is driven entirely by fundamental research rather than index weightings. Schroders’ extensive regional network of 47 local analysts across six Asian offices dedicated to providing the local insight needed to uncover and dive into the business models of these standout opportunities.
Fortunately, the Asian equity opportunity set is large enough and diverse enough for investors to be extremely selective. Indeed, the managers view the Asian market as four separate regions or clusters, each with different drivers: Taiwan and South Korea (technology cycle); China and Hong Kong (idiosyncratic factors); Australia and Singapore (dividend yield and total returns); and India and ASEAN (domestic growth). The trust’s team aims to add value by transitioning between these four key clusters as conditions evolve. Each cluster provides exposure to different themes and captures structural domestic, as well as international, growth opportunities.
In the first half, the largest cluster was Korea and Taiwan, but the team has recently been reducing this exposure, repositioning the portfolio toward the more defensive markets of Australia and Singapore.
Potential insurance
Beyond stock picking, the trust aims to protect capital during market downturns. The managers use quantitative models to spot risks and potential market stress.
When risks are flagged by the models, the managers may look to protect positions by using a flexible toolkit that includes shifting out of more risky growth companies into stable, lower-risk defensive businesses, adjusting cash holdings or tactical borrowing depending on market conditions.
The team can also employ financial derivatives like options or futures to help provide a form of insurance for the portfolio.
For example, if the managers maintain strong long-term conviction in a specific company, but are worried about overall valuations in the market where the company is listed, derivative hedges can cushion the portfolio against a broader market pullback without forcing the sale of the underlying stock.
Strong track record
This combined approach blending bottom-up stock selection with a top-down risk overlay has delivered impressive long-term results. Schroder Asian Total Return trust generated annualised net asset value total returns of 12.9% over the 10 years to end September 2026, outperforming its MSCI AC Asia Pacific ex Japan reference index, which returned 9.3% per annum.
Moreover, the Schroder Asian Total Return trust operates an active discount management policy, using share buybacks to keep the share price closely aligned with net asset value, helping it achieve one of the narrowest discounts in its peer group.
Find out more at www.schroders.com/ATR
Past performance is not a guide to future performance. The value of investments and the income from them may go down as well as up, and investors may not get back the amount originally invested. Exchange rate changes may cause the value of overseas investments to rise or fall.
We recommend you seek financial advice from an Independent Adviser before making an investment decision. You can find one at www.unbiased.co.uk or www.vouchedfor.co.uk. Before investing in an Investment Trust, refer to the prospectus, the latest Key Information Document, and Key Features Document at www.schroders.co.uk/investor or on request.
Issued by Schroder Unit Trusts Limited, 1 London Wall Place, London EC2Y 5AU. Registration No 4191730. Authorised and regulated by the Financial Conduct Authority.
