Lower growth & challenging markets
Apollo Asia Fund: the manager's report for 1Q2015

The Apollo Asia Fund's NAV rose 1.0% in the first quarter, to US$1,935.80, but is 3.9% down over twelve months, and remains 9% below the peak achieved in August 2014.

Market conditions remain for us very challenging: both value and growth-at-a-reasonable-price seem to be in short supply - at least when looking for growth that is both reasonably predictable and sustainable.

High-quality consumer plays as a group still seem to be delivering earnings growth, in local currencies at least, but our future expectations are in many cases significantly lower than hitherto. Many such shares seem to us highly valued, and vulnerable to derating on any disappointment. We temporarily parted company in Q1 with some such names, after trimming for some time.

Apollo Asia Fund portfolio earnings and dividends have made no headway over the last twelve months, which is disappointing, although partly due to the rise of the US$ in which we report. Having failed to hedge the currencies in timely fashion, we have so far decided not to start now.

Volatility must always present mispriced opportunities, but not always of the sort that we feel well equipped to evaluate better than other analysts, or with the necessary speed.¹

We continue to evaluate new opportunities across a wider range of sectors than in the past, but in Q1 our purchases were mostly additions to existing holdings. Taking the time for thorough analysis and a comprehensive understanding of the risk in each individual business has stood us in good stead in the past, but may be too slow for the current environment. We'll keep thinking about appropriate approaches and methodologies. Suggestions from our well-informed readers are most welcome.

Claire Barnes, 12 April 2015