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 December 2021. 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-Dec was US$2,794.11, up 0.4% for the month and 17.6% for the year. It's up 33.1% over two years, from December 2019 before most of us heard of SARS-CoV-2. NAV is up 58 times over the twenty-four years since inception; annual compound growth over this longer period has been 18.4%. The long-term damage from the pandemic to the economy, the social fabric and the institutional infrastructure of many countries remains incalculable. The extraordinary market rally from the March 2020 lows should be seen as a reflection of global monetary excess rather than business health.
Charting NAV on a semilog scale puts the recent performance and the longer history in context.
The market's recovery post-08 was due to unprecedented intervention by governments and unsustainable stimulus. These responses papered over and exacerbated major problems - and have been far exceeded by the response to Covid in 2020-21. The unintended consequences of bubble-blowing and excessive bureaucracy were already seen 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 years that the next stage may be harrowing, and are now in uncharted territory, exacerbated by new stresses from weather and disease, as decades of peace, prosperity, and the consensus on an orderly framework for international relations are in danger of crumbling.
The Asian crisis of 1997-98 was set against a stable global backdrop; since 2008 that fabric has been torn. 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 relatively predictable development. That simple investment case has vanished. There may still be a case for investing in Asia, and a huge fund management industry will certainly try to articulate one, but it has become much more complicated.
Our shares at the end of September were on a PE of 15 historic and an estimated 12 for the current financial year, with price to book 1.7. The current-year dividend yield was estimated at 3.5% after Asian taxes. It will take time to judge the long-term impact of pandemic and counteraction; socio-economic models may 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. However, given the magnitude of the rally, the stage is psychologically primed for brutal setbacks. 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. The pandemic has obviously hit some companies hard, but aggregate portfolio earnings and dividends have been roughly flat over the last two years, albeit with some government subsidies and tax writebacks in 2020 which may be withdrawn or used up before the end of upheaval. The portfolio book value has continued to rise, with asset inflation and retained earnings exceeding writeoffs. Business conditions were already tough in many sectors, and we have little exposure to the tech companies which benefitted from online purchases and gaming - but also, no exposure to those whose business models have been suddenly adjusted by the Chinese state. We have long prioritised resilience and cash generation, so our companies may have fared better than average, but many management teams must have been stretched so that they are now fewer surprises away from disaster. Devastating consequences for some households and companies, including many small companies with neither votes nor lobbying power, make ongoing caution appropriate.
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 four years, the index had nine down-years and fifteen up-years; the Fund had six down and eighteen 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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