This page will give the monthly performance data, using official valuations by HSBC International Trustee. More recent updates, including NAV estimates by the manager, may sometimes be found at What's New?
The first chart shows the absolute investment performance of the Fund up to the end of March 2017. The Net Asset Value per Investor Share (Class A share) has been linked to the rebased NAV of the predecessor Apollo 001 portfolio, which had the same investment style, started at the end of 1997, and was folded into the new fund at US$100 on 30 Nov 1999.
The NAV at end-March was US$2,030.55, up 5.2% for the month, 11.9% for the quarter, and 8.6% year-on-year, although still 4.5% below the high of August 2014. The NAV has made little net headway over the last four years. It is however up 42 times over the nineteen-plus years since inception; annual compound growth over this longer period has been 21%.
Charting NAV on a semilog scale shows that much of this long-term growth was achieved in the earlier years, and that the recent period of dull absolute performance is the longest since inception. (We experienced a comparable period of flat relative performance in 2004-08, but this was a period of rising markets, so the fund's NAV was then also rising.) We find current market conditions quite challenging.
The market's recovery post-08 was due to unprecedented intervention by governments and unsustainable stimulus. These responses papered over and exacerbated major problems. We have been expecting renewed turmoil, and now see the unintended consequences of bubble-blowing and excessive bureaucracy unfolding in FX and commodity price volatility, market distortion and manipulation, the displacement of useful activity by enforcement and compliance, and distributive and political tensions. The next stage may be harrowing. During the Asian crisis of 1997-98, the global economy was stable: now it is not. Asia used to be a leveraged play on global growth, on the exploitation of natural resource windfalls, and on the easy catch-up phases of development. Growth has slowed sharply, and the former pace no longer seems achievable or desirable. Rising costs of resource extraction and environmental damage are proving burdensome, and the sustainable earning-power of many countries and businesses is now hard to predict.
Our shares at the end of March were on an estimated current-year PE of 15.5, with a net dividend yield of 2.9% after Asian taxes, and price to book of 2.0. The average return on portfolio-equity is 13%, slightly better than last June when we noted that the portfolio now contains a number of special situations. Valuation nevertheless remains at the high end of the range since inception. Business conditions have been tough; we have prioritised resilience and cash generation over growth in some cases, and value and potential in others. Aggregate portfolio earnings and dividends have faltered, and we are not yet particularly confident about recovery, although the underlying book value of our portfolio holdings has shown steady growth. Our long-term growth expectations for Asian economies are much lower than in the past, the challenges facing companies are greater, and absolute risks remain high. However valuations still seem reasonable, if unexciting, in relation to the very low or negative interest rates now available on deposit, and the new risks to bank creditors. Diversification seems prudent.
When considering valuations, it should be borne in mind that, although we would never wish to be limited to a small-cap universe, many of our companies are small, illiquid, or both. A discount for these is appropriate: for small companies because of concentrated risks (a corollary of focus and concentrated rewards) and the dependence on key individuals (big companies have greater momentum); and for illiquidity, not because we intend to trade, but because it greatly increases the costs when we have to do so. On the other hand we tend to calculate EPS on recurrent earnings and full dilution, erring far to the side of conservatism, whereas figures reported under new accounting standards often seem to us overstated.
Net asset value of the Apollo Asia Fund is calculated after fees and the 15% incentive allocation. No management fees were charged against NAV of the 1997-1999 portfolio.
The Fund is managed for absolute returns, and not by reference to an index or peer group. The Fund typically has a concentrated portfolio of shares selected on a bottom-up basis, and the geographical mix has changed considerably over time.
We show an index just to give some idea of broad stockmarket direction in the region, since this usually explains most of the volatility from month to month, even though our portfolio mix may be very different. The index unfortunately excludes dividends, a major factor in long term returns. The index we have used is the MSCI all-country Far East ex-Japan index, a fairly broadly-based index denominated in US$ but comprising mainly large-cap stocks. From Nov 2001 we were forced to change to the 'free' index, which weights stocks according to estimated free float, rather than the index weighted by market capitalisation which we used earlier, and which MSCI discontinued. The two tracked each other fairly closely during 2001, and indeed since inception in the mid-80's, so we chained the two series at the end of October 2001.
The second chart shows the relative performance of the Fund against the regional index. During the Fund's first nineteen years, the index had seven down-years and twelve up-years; the Fund had five down and fourteen up. Historically, the fund has underperformed in the late stages of bull markets, but declined in absolute terms in the folowing bear. Depressed or chaotic markets have historically provided us with more attractive choices, which contributed to later outperformance. However there is no certainty that comparable opportunities will continue to arise, or that our winners will continue to outpace the losers.
The raw data is on a separate page: monthly NAV figures.
Shareholders taxable in the UK will find reportable income for years starting 2013 linked from this page: UK Reporting Fund Status.
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