Strategies managed by Fidelity International appear to have dominated the Asian equity sector on a broad spread of risk and reward measures in recent years, according to FE Trustnet research. 
In this annual series, we assess the various Investment Association peer groups for their members’ average decile rankings on 10 different metrics and within the IA Asia Pacific Excluding Japan sector the top three spots are held by Fidelity funds.
To recap, this study examines funds’ cumulative five-year returns up to the end of 2018, the individual returns of 2018, 2017 and 2016, their annualised volatility, alpha generation, Sharpe ratio, maximum drawdown, and upside and downside capture relative to the sector average.
Performance of fund vs sector and index over 5yrs to end of 2018
Source: FE Analytics
Coming in first place is Jochen Breuer’s £22m Fidelity Asian Dividend fund, which achieved a score of 2.6 in this research.
Its 70.54 per cent five-year return (which is shown in the chart above) is in the sector’s second decile but the fund has first-decile numbers when it comes to 2018 performance, alpha, volatility, maximum drawdown, Sharpe ratio and downside capture.
Breuer has a fundamental, bottom-up investment approach and looks for high quality, cash generative businesses with robust balance sheets. Top holdings include Taiwan Semiconductor Manufacturing Company, Samsung Electronics and China Pacific Insurance, with information technology and consumer staples being the largest sector overweights.
Fidelity said that the manager “has a strong focus on delivering dividend-focused total return with an emphasis on capital preservation, dividend management and capital allocation policy”. The fact that capital preservation is a priority is reflected in Fidelity Asian Dividend being one of just two funds that avoided losing money in 2018’s challenging conditions.
Next up is the £83m Fidelity Emerging Asia fund, which is managed by Dhananjay Phadnis. It scored 2.9 and made 88.79 per cent during the five years under consideration here; it’s in the IA Asia Pacific Excluding Japan sector’s top decile for five-year returns, alpha generation, Sharpe ratio and upside capture.
Phadnis is a bottom-up investor who thinks the best returns come from companies that benefit from strong economic moats as these permit the long-term compounding of earnings and puts a high emphasis on corporate governance and management quality.
The portfolio’s largest holdings are Tencent, Samsung Electronics and Alibaba, reflecting the fact that information is the second biggest sector allocation. In terms of geographies, the manager is running overweights to Hong Kong, Vietnam and India.
Source: FE Analytics
The strategy in third place is also called Fidelity Emerging Asia but this £1bn fund is run by FE Alpha Manager Teera Chanpongsang. It is in the peer group’s top decile for five-year returns, alpha generation and Sharpe ratio.
Hong Kong-based Chanpongsang has more 20 years of experience in Asian emerging markets but began his career in accounting. His approach favours companies with quality management, a good business model, sustainable growth prospects and reasonable valuations.
The FE Invest team, which has this Fidelity Emerging Asia on its Approved List, said: “Chanpongsang’s background, together with the prudent stock selection approach that he adopts, are valuable assets for the fund.
“These elements are vital as the fund is structured to stay with the less developed nations of emerging Asia. The process helps ensure quality when investing into the ‘true’ emerging parts of Asia and at the same time offering better downside protection.”
While funds managed by Fidelity occupy the top three places in this research, other IA Asia Pacific Excluding Japan members that have scored well include JPM Asia Growth, Matthews Pacific Tiger and Schroder Asian Income.
The largest member of the peer group, however, is the £3bn Hermes Asia ex Japan Equity fund. Managed by Jonathan Pines, this fund has a strong track record and achieved an average decile ranking of 3.2, placing it sixth out of 91 members of the peer group.
Meanwhile, the £2.9bn Fidelity Asia fund came in 10th place with a score of 3.3, the £2.6bn Templeton Asian Growth fund came 82nd with a 7.8 average decile ranking and the £2.5bn Vanguard Pacific ex-Japan Stock Index tracker was 56th with a score of 6.1.
Source: FE Analytics
Coming last in this research, however, is GAM Star Asian Equity. This fund has an average decile ranking of 8.6 across the 10 metrics examined in this research, following bottom-decile results for 2018 returns, alpha, volatility, maximum drawdown, Sharpe ratio, and downside capture.
Another 19 funds have an average decile ranking of 7 or above including the already-mentioned Templeton Asian Growth fund, Merian Asian Equity Income and M&G Asian.