Wealth Shortlist Update: abrdn Asia Pacific Equity

We have taken the decision to remove the abrdn Asia Pacific Equity fund from the Wealth Shortlist.

Flavia Cheong has been managing this fund since 1996 and has plenty of experience investing in the Asia Pacific region. Cheong works closely with Pruska Iamthongthong who has been co-manager since August 2007.

Over this timeframe, the fund has outperformed the regional benchmark and IA Asia Pacific excluding Japan sector average. However, more recently our conviction in the fund has been tested.

Over the last decade, the fund has failed to outperform the benchmark and the IA sector average. Our analysis suggests that, for several years, the manager hasn’t consistently added value through stock selection. This is a key factor we analyse when assessing a fund manager, and represents their ability to pick strongly performing companies regardless of what size or sector they’re in.

Given the managers focus on ‘quality’ companies, we would typically have expected the fund to hold up a better when markets fall, but the fund hasn’t met these expectations in recent years.

Our View

As part of our review of this fund, we recently met with the team to address our concerns.

It's been a difficult period of performance for the fund, and during periods where a manager's style is out of favour, we like them to stick to their investment process and focus on the long term. While we acknowledge the team's commitment to their established process, our confidence in the fund's ability to outperform over the long term has diminished.

The fund has been a long-term constituent of the Wealth Shortlist and previously the Wealth 50 and Wealth 150. Our conviction in the fund has been based on its strong team, ample resources, and long-term investment approach. We now find that these elements no longer set it apart in the competitive Asia Pacific sector. As a result, we’ve decided to remove the fund from the Wealth Shortlist.

Many competitors have significantly bolstered their capabilities in recent years, and despite the team's substantial resources, the fund's performance profile suggests these aren't fully leveraged. Additionally, the recent announcement of Hugh Young's retirement further reduces our conviction. Young, Chairman of Asia Pacific at abrdn and former co-manager of this fund, played a key role in establishing the group's Asian equities strategy in the late 1980s. While his departure is unfortunate, it’s a natural conclusion to an illustrious career.

Although we're removing the abrdn Asia Pacific Equity fund from the Wealth Shortlist, this isn't a recommendation to make any changes to a portfolio. Investors should make sure any investments match their investment goals and attitude to risk and are held as part of a diversified portfolio. If you're not sure if an investment is suitable for your circumstances, please ask for personal advice.

Past performance is not a guide to the future. Source: Lipper IM to 31/12/2023.

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