New Ratings
Allianz Dynamic Asian High Yield Bond – Neutral
Wing Chan
We have initiated coverage of Allianz Dynamic Asian High Yield Bond Fund with a Morningstar Analyst Rating of Neutral. Singapore-based lead manager Mark Tay has run this strategy, via the W share class, since its inception on 3 October 2014 and brings 22 years of investment experience, most of which was dedicated to Asian fixed income. We like that he is personally invested in the fund, which aligns his interest with that of fund investors. However, we would like to see the relatively new analyst team build its experience within the firm.
A key feature of this hard-currency, high-yield, credit-focused fund is an active approach towards investing in less-liquid, undercovered names, which has historically ranged between 10% and 40% of assets and was a key value driver in 2015, 2016, and 2017. However, that approach has hurt the fund in the year to date ended August 2018, as market liquidity weakened. Tay has since made adjustments to the process, specifically around position sizing within this basket of less liquid names. While we think these changes are sensible, Tay needs to prove that he can adhere to and execute the approach, particularly during liquidity-scarce environments.
Schroder ISF Asia Pacific Cities Real Estate – Neutral
Ronald Van Genderen
We initiate coverage on Schroder ISF Asia Pacific Cities Real Estate with a Morningstar Analyst Rating of Neutral. The fund has a distinctive process but doesn’t stand out in other aspects. The ‘Cities’ concept aims to invest in the region’s best cities and capture the highest-quality real estate exposure. This results in a concentrated portfolio that can be relatively different from the FTSE EPRA Nareit Developed Asia benchmark. It was introduced by London-based Tom Walker and Hugo Machin, who are the key decision-makers here. Both are experienced REIT investors and joined the firm in the middle of 2014 to head Schroders’ global listed real estate capability.
The duo taps into an analyst team with members most notably in Hong Kong, Taipei, Tokyo, Singapore, and Sydney. It’s worth noting that the analysts are country specialists and not solely focused on covering listed property. Our conviction in the fund is also held back by its very small size. Walker and Machin took the reins from Adam Osborn in October 2015, and it’s been tough going on a relative basis so far, but it is too short of a time frame for investors to make a reasoned assessment. The fee level is a drawback for the fund as the clean share class is significantly more expensive than comparable funds.
