This page will give the monthly performance data, using official valuations. More recent updates, including NAV estimates by the fund manager, may sometimes be found at What's New?
The first chart shows the absolute investment performance of the Apollo Asia Fund Series A Investor Shares, up to the end of February 2020. The Net Asset Value per 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-Feb was US$1,884.59, down 5.1% for the month, 10.2% year-to-date, and 11.3% year-on-year, as the COVID-19 disruption went global; again there was a sharp decline in the last few days of the month. The NAV is now 20% below the peak attained in January 2018. NAV is up 39 times over the twenty-two-plus years since inception; annual compound growth over this longer period has been 18%, ebbing as the good initial returns have been followed by little net progress in recent years.
Charting NAV on a semilog scale puts the recent performance in context: we've made no headway in the last seven years, a contrast with the previous sixteen.
The market's recovery post-08 was due to unprecedented intervention by governments and unsustainable stimulus, now spent. These responses papered over and exacerbated major problems. We expected renewed turmoil, and now see the unintended consequences of bubble-blowing and excessive bureaucracy unfolding in FX and commodity price volatility, debts impossible to pay, market distortion to extend and pretend, market manipulation, the displacement of useful activity by mitigation and compliance, distributive and local political tensions, and now growing cross-border tensions. We have been warning for some time that the next stage may be harrowing, and are now in uncharted territory, after decades of peace, prosperity, and a prevalent international order. During the Asian crisis of 1997-98, the global economy and geopolitics were stable: now they are 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. Economic and social models which served well for decades are breaking down; global consensus on many issues has shattered. Rising costs of resource extraction and environmental damage have been proving increasingly burdensome. Ecosystem damage may dwarf other threats and threaten our way of life, well within the investment horizon of a pensioner (and for growing numbers of victims, now). Risks which used to seem small, or relevant only to the distant future, are now current. The earning-power of many countries and businesses is now hard to predict; free cashflow even harder, as mitigation costs rise. The sentences earlier in this paragraph were written before COVID-19 added dramatically to the uncertainties.
Our shares at the end of December were on an estimated current-year PE of 10.3, with a net dividend yield of 4.5% after Asian taxes, and price to book of 1.5. Given the scale of disruption to economic activity this can best be taken as a guide to a vanished past, and to future potential, but it will take time to judge whether the impact of virus alarm will be temporary, or whether socio-economic models change permanently. In any case, a portfolio of well-run businesses, diversified by sector and geography, seems a sensible place in which to attempt to preserve wealth, and to take advantage of opportunities which may appear. Before COVID-19, we noted that aggregate portfolio earnings, dividends and book value had all been growing satisfactorily, masked by derating which would improve the prospect for future returns. Business conditions were already tough in many sectors, and we have no exposure to the tech companies which have benefitted from online purchases and gaming. However we have long prioritised resilience and cash generation, so the prospects for our businesses may be better than average.
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 current 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 twenty two years, the index had eight down-years and fourteen up-years; the Fund had six down and sixteen 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 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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