Large cap bias
Both funds have a large-cap bias. But the BlackRock fund tends to have greater exposure to mid- and small-cap companies compared to the Investec fund.
The BlackRock fund has invested about 8.7% of its assets in mid-cap companies and 1.3% in small-cap companies. The Investec fund has 3% allocation to mid-cap companies.
“The BlackRock fund is open to investing in smaller companies that have proven the soundness of their business models and have strong potential for long-term growth.”
Both funds invest in companies in Asia ex-Japan. However, the Investec fund has the flexibility to invest in Australia and New Zealand. It can also invest up to 10% of its net asset value in onshore Chinese equities.
In terms of geographic allocation, the BlackRock fund is overweight on China, India and Korea, according to the portfolio on 31 March. On the other hand, the fund is underweight Taiwan and Hong Kong.
“Swan and his team are currently constructive on China, Korea and India given these countries’ strong potential for reforms. Market valuations in Korea and China remain cheap, while India has the prospect of continued growth,” Yoong said.
The Investec fund is overweight China and Hong Kong, she said.
Both funds have similarities in sector allocation, holding significant allocation toward financial and information technology sectors. The BlackRock fund has nearly 58% of its assets deployed collectively in these two sectors. The corresponding figure was about 70% for the Investec fund.
Top holdings overlap
The two funds have a bit of overlap in their top five holdings.
The top 10 holdings of the BlackRock fund account for 34% of its assets whereas the Investec fund’s top 10 holdings represent nearly 41% of its assets.
Both funds share the same benchmark, the MSCI AC Asia ex-Japan Index.
“Since Swan took over management of the BlackRock Asian Dragon Fund, the fund has outperformed the MSCI AC Asia ex-Japan Index, its benchmark index, during various periods to 30 April (see table below).”
The BlackRock fund also outperformed the Investec fund in calendar year 2012 and 2013. In 2014, performance of two funds were similar.
“Despite the market correction experienced during the taper tantrums [in 2013], the BlackRock fund was able to add alpha to the portfolio. The bulk of the outperformance happened in the last quarter of the year, driven by select investments in new energy, internet and gaming companies,” Yoong said.
The Investec fund showed a mixed performance against the MSCI AC Asia ex-Japan Index.
“It beat the benchmark index in calendar years 2013 and 2014. It also outperformed the index over one- and three-year time periods to 30 April.”
She pointed out that the underperformance against the index was small for the rest of the periods, as seen in the table.
