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Pacific Assets Trust
Mickey
Posted: 13 March 2018 08:34:59(UTC)
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I was surprised to see Morningstar give Pacific Assets Trust a 'Silver' rating in their latest review of the Trust. I have held PAC for a long time now and decided to stick with it when Money Observer jettisoned it form their portfolios last year. Since then it has been about the worst performer for me and is regularly on my review list with the intention to sell.

The fund reports and especially the Annual and Half Yearly reports are usually very insightful from PAC so I have stuck with it, but you have to go back 5 years to see decent performance stats from it. The discount has recently appeared for this Trust which for a long time was on a very slight premium.

I have thought about switching to Pacific Horizon but like to keep any 'fund house' within 25% and most of that was with Scottish Mortgage until I recently cut it back. I am looking for growth rather than income. Does anyone else have thoughts on this one please?
TJL
Posted: 13 March 2018 09:59:20(UTC)
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I can't help you with the decision, but I gave up on PAC a while ago having had a good run and transferred to PHI which continues to do much better.
PAC is heavy on India and PHI is heavy on China, which may be linked to the recent under performance as I see India Capital Growth is not doing too well either.
But I haven't researched it any deeper than that.
Mickey
Posted: 13 March 2018 10:28:40(UTC)
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TJL;58625 wrote:
I can't help you with the decision, but I gave up on PAC a while ago having had a good run and transferred to PHI which continues to do much better.
PAC is heavy on India and PHI is heavy on China, which may be linked to the recent under performance as I see India Capital Growth is not doing too well either.
But I haven't researched it any deeper than that.

Thanks. It is indeed a play on India with about a third of the stock held there. The managers think India is the place to be long term, I am thinking that I will drop my holding from 10% down to 5%.
Keith Cobby
Posted: 13 March 2018 11:33:46(UTC)
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A few years ago Pacific Assets was a much better performer than Pacific Horizon. At the time my asia/pacific money was in the Aberdeen Asian trusts. I then switched to PHI and this has proved to be a good decision. Aberdeen has been a dire IT manager since the financial crisis and I have much more confidence in BG.
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Mickey on 13/03/2018(UTC), dlp6666 on 15/03/2018(UTC), Guest on 22/03/2018(UTC)
Doc K
Posted: 14 March 2018 16:50:27(UTC)
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I quite like Schroder Asia Total Return. It has a good track record since the portfolio was transferred to the current managers and also some downside protection through put options. It’s worth a look.
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Mickey on 14/03/2018(UTC), dlp6666 on 15/03/2018(UTC)
Michael Dent
Posted: 15 March 2018 10:29:34(UTC)
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I completely agree with you Mickey.

I guess this is the essence of equity investing and one of the most difficult aspects - when to buy and when to sell.

I bought into PAC in 2015 at which point it started sliding down the rankings! Conversely, Pacific Horizon started climbing up the rankings.

So the dilemma we face is do we stick with what we thought was a sound choice 3 years ago, or do we chase another rainbow? I have sold some of my PAC and dithering over what to do with the remainder.

If I was to ditch it, I like the look of Pacific Horizon or Schroder Asian total return. I have a great deal of respect for the Baillie Gifford brand but my concern would be that Pacific Horizon has had such a great run recently that will it continue, or in 3 years will I be wishing I'd stuck with PAC?

Is there an option to sell half of your holding and re-invest in Pacific Horizon/Schroder/another? I know you might not want to end up with too many individual IT's so I guess it's your call.

If you discover a solution to this problem (timing of purchases/sales) write a book and make millions or apply your solution and make billions! :-)
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Jim S on 15/03/2018(UTC)
chazza
Posted: 15 March 2018 11:02:30(UTC)
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If you are going to compare performance of one IT with another (or with funds), even in the same 'sector', you do need to look closely at where and in what those trusts / funds are invested. 'Asia', even 'Asia ex. Japan / Australasia' is a big place, and no 2 ITs or funds will have exactly the same proportions of money invested in the same countries or the same companies.
PAC (and the similar First State / Stewart Ivory funds) have been relatively heavily weighted to India, and that has been to their disadvantage recently.
Others have heavy weightings to China and / or technology.
You really have to make your own judgements about the relative prospects of the various countries and industries, and decide how much risk you want to take on.
My own bets are skewed toward China and east Asia, a bit leery of India but recognising that good managers can spot good medium-longer term prospects even in somewhat dodgy markets.
I still have a modest holding in PAC and SDP, and a little more in IAT, and still more in long-term holdings AAS and SST. Asia is a sector I want to be in but I am do not have such strong convictions that I would put all my money in one IT, however good its recent performance. I don't hold PHI.
4 users thanked chazza for this post.
Jim S on 15/03/2018(UTC), dyfed on 15/03/2018(UTC), dlp6666 on 15/03/2018(UTC), Mike L on 22/03/2018(UTC)
Jim S
Posted: 15 March 2018 11:15:06(UTC)
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Michael Dent;58777 wrote:
I completely agree with you Mickey.

I guess this is the essence of equity investing and one of the most difficult aspects - when to buy and when to sell.

I bought into PAC in 2015 at which point it started sliding down the rankings! Conversely, Pacific Horizon started climbing up the rankings.

So the dilemma we face is do we stick with what we thought was a sound choice 3 years ago, or do we chase another rainbow? I have sold some of my PAC and dithering over what to do with the remainder.

If I was to ditch it, I like the look of Pacific Horizon or Schroder Asian total return. I have a great deal of respect for the Baillie Gifford brand but my concern would be that Pacific Horizon has had such a great run recently that will it continue, or in 3 years will I be wishing I'd stuck with PAC?

Is there an option to sell half of your holding and re-invest in Pacific Horizon/Schroder/another? I know you might not want to end up with too many individual IT's so I guess it's your call.

If you discover a solution to this problem (timing of purchases/sales) write a book and make millions or apply your solution and make billions! :-)


Yeah, selling half is usually what I do in this 'should I sell or shouldnt I' situation. Then a year later I find it easier to decide about selling the rest (or not)

India Capital Growth and FCSS are both around 13% disc I think so I might be tempted to get a bit of both instead of a general AP fund.
Phil Linden
Posted: 15 March 2018 13:41:19(UTC)
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It almost sounds like you guys are debating active management against passive - by trying to jump on board the better performing IT. I've held PHI for around 20 years and most of the time believed its performance was mediocre.
When I decided to increase my exposure to the region I rejected further PHI investment and chose others that met my regional requirements and the size of business selected. Thus I now own SST JPM Indian MC Asia unbound AJIT and AAS as well as PHI. In that way I cannot ouperform greatly nor underperform greatly - but my "bet" is on the strength of the region/country.
Sometimes one can get lucky - I bought TRG and it almost doubled in just over a year - but mostly its hoping the choices perform better that the ones rejected.
I guwss my advice would be to spread the risk of failure - admittedly at the potential loss of a bigger gain.
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Jim S on 15/03/2018(UTC), Alan M on 16/03/2018(UTC), Tim D on 19/03/2018(UTC)
Split Cap Jim
Posted: 19 March 2018 09:44:11(UTC)
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It could be that Morningstar are rating Silver based on the clear investment policy of the managers. I do retain a holding and find the published reports interesting - they are looking for sustainable growth companies.

Performance was good until the end of 2016, but recent relative and absolute performance is poor.

Similar to Scottish Mortgage, Pacific Horizon (PHI) is going for high tech based growth, so a very different investment style and very China focused which concerns me.

The Far East sector seems to be a tricky one to find good long term performance, the previously high performing smaller company trusts (AAS & SST) now have very poor performance, I moved into Fidelity Asian Values (FAS) a couple of years ago - but again recent performance has dipped. Currently I quite like the look of JP Morgan Asian (JAI - paying a yield from capital) which seems to be outperforming my historic income holding in Schroder Oriental Income (SOI). I generally use the ishares ETF (IFFF) as my index comparison - and many trusts do seem to be able to beat that.

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Mike L on 22/03/2018(UTC)
Antony A
Posted: 22 March 2018 10:37:35(UTC)
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The above discussion all goes to show the problems with accepting the view of those who claim that a global portfolio should hold no more than 10-12 trusts or funds, on the grounds that any more is too complicated and veers towards "replicating the index". The risk of holding such a limited range of trusts is that you choose one or two duffers and suddenly you're losing out on a whole swathe of growth and development in the Asia-Pacific region.

In my view the Asia-Pacific is too vast and diverse and the rate of change too great for any one trust or index to capture or mimic, so it makes sense to invest in several trusts with differing inclinations as regards size of company, geographical coverage, and theme. I prefer active trusts because several studies show that the Asia-Pacific region is one where they particularly tend to outperform the available indices.

As a medium- to long-term growth investor, my choice of trusts is first driven by consistent strong performance, so I search for trusts that have achieved 18%+ annualised returns over 1, 3 and 5 years. The 18% figure is arbitrary but helps to narrow things down; it can always be tweaked. For Asia-Pacific coverage, this throws up SMT, MNKS and EWI as part of their global remits, and FCSS for small and medium-sized companies in China. There are also three Vietnamese trusts, but I tend to avoid single-country trusts because they strike me as too specialised - equally, this does suggest that a more generalist trust with a heavier Vietnamese leaning is worth considering: PHI has 7.5% for example. For probably unfair reasons (but one has to avoid being overwhelmed with choice) I also avoid trusts with ludicrously high premiums (LTI), ones that seem to mimic other trusts (MNL), and private equity globalists, though I will sometimes consider the latter if I have the time.

I then search for 18+% over 1 and 3 years, to capture trusts that have seen recent improved performance, perhaps due to a change of manager. This throws up PHI, another Baillie Gifford trust, plus Schroder Asian Total Return and MIGO, a global trust that invests in a number of specialist AP trusts like Macau Property which could add some spice.

If I'm struggling to find more candidates for investment, I will look at trusts with weaker performance in the short term, but good performance over 3 and 5 years, and then look into why this might be. One example is FAS, which is small-company value-orientated and has lagged recently, partly through some perhaps-unnecessary conservative calls, an over-emphasis on India, and having no particular leaning towards technology, which has so benefited EWI, PHI and TEM over the last year.

I then look at factors such as themes and geographical coverage, and try and whittle the list of trusts down to something manageable, which sometimes means dropping some trusts because there's nothing that particularly distinguishes them in my inevitably partial view. I like to keep my holdings to an arbitrary minimum of 2.5%, and 5% for core holdings, to force me to make some decisions.


I currently invest:

5% each in SMT, Monks and EWI, as I like Baillie Gifford's process and these three trusts are sufficiently different in their remits to justify including each of them in my portfolio.

5% in FCSS, for China: smaller-caps, with SMT and Monks tending towards larger-caps.

2.5% each in FAS and PHI, as their approaches and geographical spread complement each other. I could have chosen Schroder Asian Total Return, or SDP and JPM Asian have been candidates too, but I keep them in reserve in case I lose faith in any of the others. JPM Asian looks attractive: good discount and yield, decent alpha and Sharpe, but like the others it is 45-50% in China including Hong Kong, whereas FAS is only 15%. FAS remains under review, and I might swap, but retain some holding via the subscription shares FASS, in case the trust recovers after I sell up (which is what usually happens). I agree PHI has had a great run recently, but this needn't be a fluke - it could just be that the trust has found its mojo, like sister trusts SMT over the long-term and MNKS since about three years ago when Charles Plowden & Co took over, and that it is tapping into genuine long-term economic changes in the region.

2.5% in MIGO, for trusts I like the look of but can't justify a larger holding, e.g. Macau and India Capital Growth. I keep MIGO under review but it's shorter-term performance is good and it has a lower risk profile than many of my trusts; it also invests in some other trusts I like, such as ARTL and Atlantis Japan, so there's a degree of confirmation bias here.

Finally there are useful Asia-Pacific holdings in some of my other trusts, such as 3i, Allianz Tech, private equity trust HVPE, and Worldwide Healthcare, so my portfolio overall has 16.3% in the region, and that's not counting the underlying companies held in many of my trusts that do substantial business there. I think that's enough for the time being: for what it's worth the Vanguard World ETF has 14.6%, though it also has 54% in the US and I'm nowhere near that!
7 users thanked Antony A for this post.
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King Lodos
Posted: 22 March 2018 10:54:33(UTC)
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Antony A;59140 wrote:
The above discussion all goes to show the problems with accepting the view of those who claim that a global portfolio should hold no more than 10-12 trusts or funds, on the grounds that any more is too complicated and veers towards "replicating the index". The risk of holding such a limited range of trusts is that you choose one or two duffers and suddenly you're losing out on a whole swathe of growth and development in the Asia-Pacific region.


That's absolutely true, and that's why large investors committed to the active route tend to hold 100s of funds.

But the other side of the coin is that it's much easier to find one or two managers with the ability to outperform consistently than it is to find 15.

And if you hold 15 funds, and pick 3 really great winners, the other 12 are going to drag overall performance right back down to average.

Investment Trusts can give you an illusion of outperformance, through gearing .. If you build a virtual tracker, but average gearing is 120%, then you may well outperform, even with 30 funds.

But the reason a lot of managers don't like gearing is because you don't get that extra return without extra risk, plus the cost of borrowing .. So if you've got the ability, simply increasing your allocation to stocks is generally a better idea
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