Apollo Asia Fund performance

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 November 2008. 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-Nov was US$559.84: down 4.2% for the month and 38% from the high at end-May. It was down 36% year-to-date, and 34% over twelve months. After recent declines, NAV is still up 11.6 times over the ten-plus years since inception; annual compound growth has been 25%.

Asian market volatility has recently been comparable to that during the regional crisis ten years ago, and comparably interesting valuations are now to be found. Now, as then, there have however been many opportunities for companies to lose money - on FX, derivatives, inventory prices, defaulting customers, etc. Then, however, the global economy was stable. This time round it is hard to assess what level of export demand will persist, and how much financing will be available. A year or two of disruption is one thing, but the sustainable earning-power of many businesses is now hard to predict, and balance sheets can change dramatically in times of turmoil.

Our shares at the end of October were on an estimated current-year PE of 7.6, with a net dividend yield of 5.6% after Asian taxes: price to book was 1.2, and the return on portfolio-equity was 16%. Superficially attractive valuations now abound: companies may be found on historic PEs of 2 or 3; below book, below cash, etc. However, we consider all such options in relation to our existing portfolio and to the familiar strengths and weaknesses of our existing holdings, as well as to the new risks now apparent. We consider current valuations attractive, but risks still high.

When considering valuations, it should be borne in mind that 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.

Not all of our companies are small, and we would never wish to be limited to a small-cap universe. Some large-caps have been subjected to distressed selling; many are now on our radar screen.

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 may change considerably over time.

We show an index just to give some idea of broad stockmarket direction in the region, since this until recently explained most of the volatility from month to month, even though our portfolio mix is usually very different. 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 has discontinued. The two tracked each other fairly closely during 2001, and indeed since inception in the mid-80's, so we just chained the two series at the end of October 2001.

The second chart shows the relative performance of the Fund against the regional index. Most of the outperformance came in the first six years; in the next four years the index rose steadily, with a lot more investor attention to the worthwhile opportunities - and in the latter stages to racier ones which we preferred not to risk. The panic of 1998 was a particularly fruitful period for us, and we outpaced the index and most other funds. In 1999, we were happy to keep up with the pack, given a significantly more risk-averse positioning - and the absolute return in any case was 64% for the year. 2000 was the fund's only down-year to date, but partly explained by overall market and currency direction; we outpaced the index by 42%. In both 2001 and 2002, the Fund made gains despite a fall in the index. In 2003 the Fund outperformed significantly, but the next three years were more pedestrian (slightly ahead in '04 & '06, behind in '05). In 2007, the Fund underperformed a demented bull. In recent weak months, the Fund has fallen less than the indices: however this may not always be the case, and recent months will have shattered any illusions that it will prove a safe haven in the short term. In the event of a prolonged downturn, we hope that the Fund's intrinsic value might hold up better than most, due mostly to the selection of companies which we own, helped by our long-term shareholder base and conservative structure. During the Fund's first ten years, the index had four down-years and six up-years; the Fund had one down and nine up.

The raw data is on a separate page: monthly NAV figures.