Manager review
First State Stewart split into two entities last year – the Edinburgh-based Stewart Investors and the Hong Kong-based First State Steward Asia (which the India fund falls under). Ng said that the split was done to make the investment teams smaller and more nimble and “to generate more effective discussion, debate and dialogue.
“They have quite a flat hierarchy in terms of their team structure,” said Ng. “They encourage investors to discuss and debate and through that they try to come up with investment ideas,” he added.
The First State managers Vinay Agarwal and Richard Jones are based in Singapore and Hong Kong respectively.
The Matthews Asia co-managers — Sunil Asnani and Sharat Shroff – have been managing the India fund since its launch in June 2011. Shroff also manages the firm’s Pacific tiger strategy and co-manages the Asia growth and Asia focus strategies.
They are both based in the US, but Ng said that they travel to Asia frequently to visit companies. Of the two firms, Matthews Asia is newer to Asian investors and therefore doesn’t have as strong a distribution network as First State, he added.
Fee Review
The Matthews Asia fund charges a management fee of 1.25%. The First State fund is higher at 1.5%. Ng said both are broadly in line with the market average.
Ongoing charges (OCF) for the Matthews Asia fund were 2% as of 31 March 2015. The First State fund has multiple share classes but for Class I and Class II, which target retail investors, the ongoing charge was 1.69% and 3.03% as of December 31, 2014.
Ng said that the 3.03% ongoing charge for the Class II is “quite high” but that it could be due to the cut-off period or an exceptional case. “I think for First State it would need some monitoring going forward before we can make a conclusion because the OCF shouldn’t be that high,” said Ng.
Conclusion
FE Advisory rates funds using their crown rating system, which assess funds using three separate tests: alpha, volatility and consistency. The First State fund gets a five crown rating and the Matthews Asia receives four crowns.
Ng said that if he were to pick one of the two funds based on consistency, it would be the First State product, which appeals to investors who want to outperform the market in a relatively stable way.
“If you look at the sector allocation, they have been overweighting consumer staples and this is a relatively stable sector, which makes it more defensive,” said Ng.
The Matthews Asia fund is also overweight on the consumer sector but to a lesser extent. As such, Ng said that the Matthews Asia product could appeal to more aggressive investments for investors who want less focus on defensive stocks.
