LONDON (Alliance News) - Asian Total Return Investment Company failed to achieve its target of an absolute return in 2013, also managing to underperform against its reference index and peers.
The company said its share price total return fell by 3.4%, and the net asset value total return by 8.4% in 2013, whilst the reference index (sterling adjusted) fell by 1.6% and the peer group returned on average 1.7%.
Chairman David Robins said there is reason for positivity despite the poor year.
"Your portfolio managers are actually becoming more positive on the outlook for China, given the commitment of China's new political regime to structural reform. The indiscriminate sell off across all markets in the region has thrown up some interesting opportunities to pick up quality stocks at depressed levels. All in all, your board expects that whilst there may continue to be volatile periods in markets this year, the prospects are in place for better performance from Asian markets than in 2013," Robins said.
The trust, which changed investment manager to Schroders at the end of the first-quarter of 2013 in order to follow an absolute return strategy. Under such a strategy a company target returns without the objective of beating the performance of a benchmark index.
In theory, that approach is meant to protect capital in falling markets, but can result in underperformance in rising markets because such a strategy deploys capital to so-called protective positions in case markets fall.
"From the end of March, following Schroders' appointment as Investment Manager, the NAV declined 11.4% to the end of December 2013, underperforming the Reference Index which fell 7.0% over the same period. Holdings in Hong Kong, Thailand and Indonesia were the main contributors to the negative performance. By comparison selection in Chinese securities was supportive," Robin Parbrook and King Fuei Lee of Schroder Investment Management Ltd said in a statement.
The portfolio manager said its capital protection policies didn't work as it had hoped.
"The company held put options to provide protection against global macro risks. These puts were mostly on the liquid North Asian markets and Australia. With the second half market falls mostly in the smaller ASEAN markets and India, where no liquid puts are available, it was impossible to hedge against market weakness. On a more positive note, the Australian dollar hedge was profitable and, with put prices relatively low, there was only a small drag on performance from the hedging strategies," Parbrook and Fuei Lee said.
The company's shares were Friday quoted at 172.75 pence, up 0.4%.
By Samuel Agini; samagini@alliancenews.com; @samuelagini
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Schroder Asian (ATR)