Schroder AsiaPacific (SDP ) has announced a fee cut in its latest results, which saw performance scuppered by an underweight to China.

That positioning saw the £831m trust, run by Abbas Barkhordar and Richard Sennitt, miss out on the excitement around the launch of artificial intelligence (AI) model Deepseek.

Interim results published yesterday highlighted that Schroder AsiaPacific fell short of its MSCI All Country Asia Pacific ex-Japan index in the six months to end of March, with a net asset value (NAV) total return loss of 3.3% versus a decline in the benchmark of 2.2%.

Investors were offered some respite in the form of a fee cut as the trust reduced the fee to 0.65% a year on the first £600m of net assets, from 0.75%. Management charges remain at 0.6% thereafter. 

While Asian markets suffered in absolute terms as the threat of tariffs and a US trade war with China put the region under pressure, relative performance was held back by the managers’ underweight to China.

This meant the trust failed to fully reap the rewards enjoyed by Chinese markets, not only from government stimulus efforts to counter tariffs, but a rally at the start of the year driven by the launch of Deepseek, a low-cost AI language model that threatened existing incumbents, including ChatGPT.

The Schroders managers said the launch saw a ‘surge in the share prices of Chinese companies that are perceived as beneficiaries of domestic AI development, particularly in the internet, automobile and robotics sectors’.

This included e-commerce giant Alibaba, which was a ‘key beneficiary of the AI-driven rally in 2025, supported by its cloud infrastructure business and the development of its own large language model’.

‘Although this has historically been a low return division of the company, its announcement of a substantial increase in capital investment in the area was greeted positively by investors, eager to see growth beyond its core e-commerce operations, which remain under intense competitive pressure,’ said the duo.

The rise in Alibaba’s shares encouraged the managers to exit their position during the winners.

Other AI winners included electric vehicle manufacturer BYD and consumer electronics company Xiamoi, but Barkhordar and Sennitt said ‘our lack of exposure to this fiercely competitive sector’ was a detractor.

A lack of Chinese banks, such as China Construction Bank, Bank of China and ICBC, also hampered returns. All returned over 25% in the period on the back of ‘official support for the shares’ and the appeal of their high dividends.

‘Despite its significant index weight, we have zero exposure to the sector, because we are concerned that a deteriorating earnings outlook may ultimately threaten these dividend,’ said the managers.

The duo initiated positions in four Chinese stocks over the six months, adding businesses with ‘strong competitive positions in attractive industries’.

This included food delivery platform Meituan, which has ‘steadily improving profitability’, and Trip.com, China’s leading online travel agency, which is expanding internationally.

Domestic sports brand Anta Sports was also added, as it is benefiting from a shift away from global brands such as Nike. Lastly, Centre Testing, a specialist testing services group, was added thanks to its prospects in a recovering economy.

While Barkhordar and Sennitt increased exposure to China over the six months from 19% to nearly 25% at the end of March, their exposure is still more than 10% underweight relative to the benchmark. They said this reflects ‘structural concerns around demographics and an economic model heavily reliant on investment, manufacturing and exports’. These challenges are ‘unlikely to be resolved by short-term stimulus’.

On top of these underlying challenges, the managers said ‘several index heavyweight stocks have run well ahead of fundamentals’ due to the government propping up the equity market.

‘Against this backdrop, and given the unpredictable geopolitical environment, we remain cautious about adding materially to Chinese equities, even though further domestic stimulus measures may arrive in the coming months,’ they said.

Bringing the figures up to yesterday, Schroder AsiaPacific shareholders have enjoyed a 38.8% return over five years, beating the benchmark’s 32.7%, according to Deutsche Numis data.

The trust has suffered from a stubborn share price discount to NAV, which stood at 12.7% yesterday. That is despite significant buybacks – with nearly £41m during the results period – to try to address the issue. 

Sennitt additionally runs the Schroder Oriental Income (SOI ) closed-end fund. Its own interim results also recently reported a lag in performance an account of a China underweight.