Results from the WM Company's analysis of 21 specialist Asian portfolios with a primary benchmark of the MSCI All Countries Far East Free Ex Japan index for the quarter ending June 1997, show that the average manager achieved a return of 6.8% against the 5.1% posted by the benchmark. Indeed a trend of outperforming the benchmark is beginning to occur as it is the fourth consecutive quarter that this has been seen. For the 12 months ending June 1997 the universe strongly outperformed the benchmark by over 6%. Since the inception of this universe at the beginning of 1995, it has outperformed the benchmark by an impressive 1.4% per annum.

In the three months to the end of June 1997 the key contributor to the universe's superior performance has been the relatively high level of investment in Hong Kong. The average portfolio has 42% of assets here, almost 9% more than the benchmark's exposure.

Further value was added through the mix of equities held as the universe outperformed the MSCI Hong Kong index by 4%.

Three markets performed particularly poorly during the second quarter; Malaysia (-16.3%), Philippines (-12.5%) and Thailand (-21.1%). In Malaysia and Thailand the average manager ap-pears to have been alert to the problems in these markets and was well underweight relative to the benchmark as money was shifted out during the period. Those managers who maintained this strategy throughout July and August when the Malaysian ringgit and the equity market collapsed, are well placed to continue outperforming the benchmark. In the Philippines the universe was marginally overweight compared to the benchmark which proved to be a slight drag on the overall performance but this was offset, to a certain extent, as they held stocks that outperformed the market.

A feature of the universe during the second quarter of 1997 is that the managers are adding significant value through stock selection, having outperformed the relevant MSCI index in every market with the exception of Malaysia and China.

Mark Philip is a client manager with the WM Company