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Tulloch's Scottish Oriental trust nets £1.7 million performance fee
by Robert St George on Oct 31, 2013 at 08:07
The managers netted the performance fee over the 12 months to the end of August as the trust’s net asset value surged by 20.1% compared with a 10.1% rise by the MSCI AC Asia excluding Japan index.
The £268 million Scottish Oriental trust’s performance through the year was driven by its exposure to Asian consumer stocks, with two Thai companies in particular excelling. Credit provider Aeon Thana benefited from the combination of wage growth and low unemployment in Thailand, Tulloch (pictured) noted, while a pickup in tourism suited Erawan Group, a conglomerate spanning hotels and shopping centres.
However, Tulloch confirmed he had recently taken profits from these consumer-oriented stocks as valuations had reached what he described as 'unrealistic levels’.
The manager explained: ‘The region has become increasingly dependent on domestic consumption, and the valuations of locally focused consumer companies, especially in South East Asia, have become stretched. More generally, there are a limited number of companies trading on valuations that offer significant upside over the longer term.’
In their place Scottish Oriental has increased its exposure to India, where Tulloch reported finding ‘some excellent franchises with good management trading on reasonable valuations’. The trust has for example initiated positions in Tata Global Beverages and CMC, another part of the Tata empire that specialises in IT services, with Tulloch highlighting their potential to profit from their significant overseas sales given the weak rupee.
Yet despite these opportunities, Tulloch has kept a tenth of his portfolio in cash on the back of concerns about valuations in the region. Last month the Scottish Oriental trust received shareholder approval to invest in larger companies, as it had previously ‘mainly’ kept to those with market capitalisations of less than $1 billion.
Scottish Oriental has been a spectacular success over the long term as well as the short term: on a 10-year view it has offered a near fivefold return, while its benchmark has doubled and the FTSE All Share has gained 65%.
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