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Matthew Dobbs, manager of the Schroder Asia Pacific investment trust, has reduced gearing on the fund to 4%, near the bottom of its range, saying that while growth prospects remain strong for the region, there are some external risks.

Dobbs has weighted his portfolio towards domestic growth stories to militate against these external risks. Growing urbanisation is also supporting domestic consumption. He continues to believe in the prospects for China, but is taking exposure through Hong Kong and Singapore-listed stocks, which offer better value.

The trust is targeting domestic growth through overweight positions in consumer cyclicals, financials (particularly property) and selected industrials such as shipbuilders and transportation. The trust is underweight IT, utilities and energy.

The largest overweight position is Hong Kong, which includes companies with significant interests in mainland China. The trust is underweight in Taiwan, particularly its information technology stocks. It is also underweight in Korea’s export sensitive stocks. Dobbs believes India looks good in the long-term, but is expensive in the short-term. As such, his weighting is currently 5%.

The trust is rated a ‘core recommendation’ by WINS Investment Trusts. The broker says: 'The fund benefits from an experienced and well-resourced team and has a good track-record generated from its stock-picking approach. With a discount around 10%, we believe the fund currently offers good value.'

Dobbs also manages the Schroders Oriental Income trust, which aims to deliver absolute returns from investment in the region. Despite the strong performance by Asian equities, he still believes valuations look reasonable. Dividend growth has been in line with expectations.

The trust currently has a 28% weighting in Australia. Like the AsiaPacific fund, it is overweight Asian consumption plays, particularly financials and consumer cyclicals. It has a yield of 3.8%.

There is no benchmark for the trust. It has underperformed regional indices over the past two years, but this is to be expected for an absolute return vehicle in a period of strong equity growth. The fund is currently trading on a 2.5% discount, despite its commitment to buying back shares on a 5% discount.

WINS Investment trusts rates Dobbs and his team highly. It says: 'Schroder Oriental Income is clearly not a mainstream Asian play given its bias to higher yielding stocks and domestic plays. However, in our view, the fund is an attractive vehicle for investors seeking sources of diversified income from well-managed exposure to Asian companies with the potential for long-term capital growth.'