New to Select 50: Federated Hermes Asia ex-Japan

The Fidelity Select 50 list of handpicked funds is kept under constant review by the independent consultants at Fundhouse to ensure it reflects the best-in-class options available. Changes are therefore noteworthy events and merit careful consideration.

In November it was decided to remove Stewart Investors Asia Pacific Leaders after the announcement that the firm was to close and the assets transferred to its sister company, FFSA Investment Managers. This created a gap in the coverage of the region, which after extensive research, has now been filled with Federated Hermes Asia ex-Japan.¹

Since its inception in November 2012, the fund has been managed by a stable team led by Jonathan Pines. Over this period, it has significantly outperformed the benchmark due to strong stock selection, despite its investment style being out-of-favour for much of the time.²

Objective and approach

Federated Hermes Asia ex-Japan aims to generate long-term capital growth from a concentrated portfolio of companies chosen from across the region. Pines and his team have a contrarian philosophy, targeting stocks that are currently out-of-favour but are likely to perform better in the future.³

The investment approach focuses on identifying companies that are attractively priced relative to the quality of the underlying businesses and prioritises those where the potential upside is greater than the downside risk. This involves looking for stocks whose valuations have temporarily dropped despite their fundamentals remaining sufficiently strong.⁴

What is the manager’s outlook for 2026?

In his outlook for 2026, Pines says that despite a palpable sense of concern from some investors about the ongoing rise in stock prices, Asia ex-Japan equities remain cheap – both in absolute terms and relative to developed markets. Because of this, he thinks stock prices in the region will continue to climb the ‘wall of worry’.⁵

“China, in particular, is only beginning to rebound from muti-year trough valuations, despite the country’s increasingly domestic-focused economy. Moreover, dividend yields compare favourably to local interest rates, unlike in most developed economies.”⁶

The underlying portfolio

At the end of December, the fund held 63 companies, with the ten largest positions accounting for 47% of the assets. These included well-known names such as Samsung, Taiwan Semiconductor Manufacturing and Tencent.⁷

Top 10 holdings

1. Samsung Electronics
2. Taiwan Semiconductor Manufacturing
3. Tencent Holdings
4. CP All
5. Bangkok Bank
6. Samsung Fire and Marine
7. JD.com
8. AAC Technologies Holdings
9. Samsung Life Insurance
10. Swatch

Source: Federated Hermes Asia ex-Japan Equity Fund factsheet, 31 December 2025.

Regionally, the largest overweights relative to the MSCI AC Asia ex Japan benchmark were Korea, Thailand and China, while the main underweight was Taiwan. At the sector level, consumer staples and consumer discretionary were the most favoured, whereas financials, healthcare and IT were all underrepresented.⁸

The analysts at Fundhouse say that the portfolio is reasonably concentrated at the stock level, although it is appropriately diversified in terms of sector, country and market-cap. They have found clear evidence of a consistent bias to the stated valuation approach and some of the quality characteristics the team considers important to their investment process.⁹

Performance and cost

Over the past five years, the F sterling accumulating share class has generated an annualised average total return of 9.8%, which is well ahead of the benchmark’s 4.5%. It has also significantly outperformed since inception in November 2012, despite facing a value-style headwind for much of the time.¹⁰

The manager believes that to achieve substantial long-term outperformance requires accepting short-term underperformance and divergence from the benchmark. As a result, investors should expect sizable fluctuations in the relative returns, which based on recent history could be as high as 10% to 15% a year.¹¹

Fundhouse says that the main source of excess returns has been successful stock selection, which has more than offset the relative strength of growth companies, resulting in a credible performance record. They also believe that the ongoing charges figure of 0.83% is comparable to the fee on the most widely available share classes in the sector and represents good value for money given the fund’s record of outperformance.¹²

• More on Federated Hermes Asia ex-Japan

Past performance is not a reliable indicator of future returns

Source: Morningstar, total returns from 31.12.20 to 31.12.25. Excludes initial charge.

^{1, 2, 4, 9, 11, 12} Fundhouse
^{3, 7, 8, 10} Federated Hermes, factsheet 31.12.25
^{5, 6} Federated Hermes, equities 2026 outlook

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. This fund can invest in overseas markets and so the value of investments can be affected by changes in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Before investing, please read the relevant key information document which contains important information about the fund. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. Eligibility to invest in an ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Select 50 is not a personal recommendation to buy or sell a fund. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.