SDP offers diversified exposure to the Asia Pacific ex-Japan region via a portfolio of 70-90 stocks, selected primarily on a bottom-up basis. Holdings tend to fall into four broad categories: positive transition, core stocks with superior business models, opportunistic positions and those based on intrinsic value. The manager is not constrained by the benchmark and the portfolio has a high active share. At the end of February 2016, the portfolio had a high active share of 72.6%, with 22.7% of the portfolio in non-index stocks. Input to stock selection is provided by a team of 43 analysts based in seven Asian regional offices, including India.

Asian equities have lagged the world market since 2011, primarily as a result of a strong US market. Heightened concerns regarding developments in the Chinese economy have led to a further leg down in relative performance. Although global growth estimates are being revised down, the outlook for GDP growth in the Asia Pacific ex-Japan region is significantly above that for advanced economies, driven in part by rising disposable incomes and relatively low household debt. As a result, the P/E valuation discount of c 20% in the region versus the world index may present an opportunity to investors with a longer-term outlook.

The current cum-income discount of 11.0% is wider than the one-, three-, five- and 10-year averages, probably reflecting concerns about China. Given the positive long-term performance of the fund, over time, if sentiment towards the region improves there is the potential for the discount to narrow. An informal discount control policy aims to maintain the long-term, cum-income discount below 10%.