Asian income has never been more attractive

The global financial crisis is often referred to as something that has never been seen before. At its worst, professional investors recoiled in fear, claiming they never thought it would get so bad.

For Schroders’ Richard Sennitt, however, the crisis is déjà vu.

Mr Sennitt began his fund management career at Schroders 18 years ago as an analyst on the Japanese desk. Japan was in the early years of its own financial crisis, which spread to the rest of Asia in 1997-98. Mr Sennitt, manager of the £159.1m Schroder Asian Income fund, is well versed in navigating his investors through tough times.

As the developed world is condemned to slower economic growth, the credit crunch and the subsequent eurozone debt crisis are often compared to what happened in Japan after its great credit binge of the 1980s. There are obvious parallels. Japan seemed to run out of policy options, with zero per cent interest rates and a huge fiscal deficit both failing to boost the economy.

This environment, Mr Sennitt claims, was a “very good place to cut my teeth on”.

“In hindsight, people at the time thought it was unfashionable to look at Japan, but given what’s happened subsequent to that – the Asian, and more latterly, the global crisis – it has proved to be pretty helpful, because I’ve learnt some lessons from the past,” he says.

“I feel like I have experienced the ups and the downs, as I have had to invest in both the good and the bad times. From that perspective I know to take each day differently.”

Mr Sennitt, who started running the Schroder Far East fund in November 2001, which was renamed the Schroder Asian Income fund in December 2006, says that the fund’s mandate was changed to “exploit the opportunity for income in Asia”.

Typically, investors have turned to the UK for equity income, and have only ever thought of Asia as a place to go for growth. Mr Sennitt says that he therefore wanted to exploit the inefficiencies in the marketplace – in particular, income stocks within Asia that had been neglected by UK analysts.

“Asian income has never been more attractive,” notes Mr Sennitt.

“In 2006 base rates in the UK were 5 per cent – they’re now only half a per cent.

“We all are very familiar with the problems we have in the UK. Rates are so low and governments are fiscally spent in a way that there is very little that they can do to get the economy going.

“In Asia that isn’t the case anymore. If you go back six months or so inflation was excessive and people were scared that it was getting ahead of itself, but now that outlook is starting to settle down. We’ve already started to see governments in the region cutting rates.”

Mr Sennitt says that the fund is a suitable vehicle not only for UK investors who are looking to diversify their risk away from the UK, but also for investors who are looking to get exposure to China with lower levels of volatility.