China bulls may be excited that the emerging markets giant is finally relaxing zero-Covid restrictions, but it is still early to call the recovery in the Middle Kingdom’s faltering economy. Investors who want exposure to Asia Pacific growth without losing sleep over developments in China should consider Pacific Assets Trust (PAC) as it only has small exposure to this country.

Shares in the Stewart Investors-steered investment trust trade at an attractive 8.1% discount to the portfolio’s net asset value, despite an impressive record of outperforming Asia Pacific funds and trusts, particularly during more difficult market conditions.

A high-conviction portfolio spread across 63 holdings, Pacific Assets gives investors a differentiated exposure to Asian equities through a significant allocation to populous India that has proved helpful during the recent China sell-off, though an ongoing charges figure of 1.14% is higher than that of peers.

The £428 million trust seeks to generate long-term capital growth by putting money to work in carefully selected companies in the Asia Pacific region and Indian sub-continent, but excluding Japan, Australia and New Zealand. Portfolio construction, according to stockbroker Investec, is focused on ‘identifying high-quality Asian franchises that are capable of thriving through challenging macroeconomic periods.’

Stewart Investors has a keen ESG (environmental, social and governance) focus. Its managers seek high-quality companies with exceptional cultures, strong franchises and resilient financials that will benefit from the sustainable development of the Asia Pacific region.

As Investec notes, ‘at a time when almost every investment vehicle is scrambling to demonstrate ESG credentials, and we are encountering a plethora of newly discovered ESG experts, we highlight that the manager’s core philosophy, which is founded on the principle of good stewardship, has been in place since 1988.’

A tilt towards India and only limited Chinese exposure has proved beneficial for Pacific Assets Trust, which is the Association of Investment Companies Asia Pacific sector’s best one-year share price total return performer and the second-best performer over five and 10 years.

India, which is forecast to deliver one of the globe’s highest earnings growth stories this year supported by a pro-growth budget, has traditionally provided rich pickings for Stewart Investors.

Pacific Assets Trust’s exposure to India stood at 47.4% as of 31 October 2022 through investments in areas like power generation products, finance, and coffee and tea production and distribution. That compares to a modest 7.4% allocation to China, while other regional exposures included Taiwan and Indonesia at 8% and 7.9% respectively.

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