HEAD -TO-HEAD: Black Rock Asian Dragon vs Investec Asian Equity

Calendar year performance:

Source: Lipper IM, on total return basis, in USD terms. MSCI Index above refers to MSCI AC Asia ex Japan TR USD Index

Performance over various periods until 30 April:

Source: Lipper IM, on total return basis, in USD terms. MSCI Index above refers to MSCI AC Asia ex Japan TR USD Index

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.

Over the long-term, the Investec fund has fared better than the index. It registered 54.8% return over a five-year period to 30 April compared to index’s rise of 44.2%. Over ten-year period, the fund gained nearly 237% whereas the index rose about 184%.

Performance over five and 10-year period to 30 April:

Source: FE

Annualised standard deviation, a measure of portfolio volatility, was higher for the BlackRock fund (14.3% for three-year period to 30 April) compared to both the Investec fund (13.3%) and the benchmark index (12.3%)

Manager Review

The BlackRock fund is managed by Andrew Swan, who joined the firm in in August 2011. As mentioned earlier, he is head of the Asia fundamental equity team. 

Swan is responsible for managing several regional equity portfolios, setting investment strategy and developing BlackRock’s Asian investment platform. Prior to BlackRock, he was with JP Morgan for 17 years.

He is also managing other funds at Blackrock: the BlackRock Asia Pacific Ex- Japan, the BlackRock Asia Special Situations, the BlackRock GF India, the BlackRock Global Funds ASEAN Leaders, the BlackRock Global Funds Asian Growth Leaders, the BlackRock Global Funds China and the BlackRock Global Funds Asia-Pacific Equity Income.

“Swan is supported by an able team of portfolio managers and analysts, although there was some notable turnover within the team in mid-2014. Swan has since rebuilt and further strengthened the team,” Yoong said.

The Investec fund has been managed by Greg Kuhnert since 2005, according to FE Analytics. 

Kuhnert is a portfolio manager and financial sector specialist on the 4Factor global equity team at Investec Asset Management. He is the lead manager for Asian investment strategies. He joined Investec in 1999 as an analyst researching Asian and global equities.

“While Kuhnert is supported by a broader team, he continues to be responsible for much of the qualitative research on companies that have passed Investec’s 4Factor screens.”

Kunhert is also manager of the Investec Asia-Pacific Equity and the Investec Asia ex-Japan funds.

Fees

Both the BlackRock fund and the Investec fund levy annual management fees of 1.5% for their retail share classes. 

The ongoing charges or total expense ratio for the BlackRock fund was 1.86% for the year ended 31 August. The TER for the Investec fund was 2.05% for the year ended December. 

“The higher figure for the Investec fund is interesting, particularly given the fund’s AUM is significantly larger than the BlackRock fund,” Yoong said.

Conclusion

Both funds have proven the ability to enhance returns over market cycles.

The BlackRock fund has shown greater potential for alpha generation and delivered strong returns since Swan took charge of the fund.

But this has come with greater volatility, Yoong said.

“The BlackRock fund might face more downside risk should there be sharp corrections in the market.

“The Investec fund should outperform its benchmark when there are clear market trends. But it is likely to lag during periods of volatility or market inflection points.

“The Investec fund is likely to deliver more consistent performance and modest alpha generation against the market over longer time periods,” Yoong concluded.