Newton cuts yield target on £2bn Asian Income fund

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Newton cuts yield target on £2bn Asian Income fund

Newton Investment Management is to cut the yield target on its £2.2bn Asian Income vehicle in order to broaden the fund’s universe of investible stocks.

As of May 26 the fund will target an annual yield at least 25 per cent higher than that of its FTSE Asia Pacific ex Japan index. The current target is a yield that is 35 per cent higher than that of the index.

Meanwhile the yield threshold at which stocks can be considered for inclusion in the fund will drop from 100 per cent to 85 per cent of that of the index.

The threshold at which stocks are to be sold from the portfolio will also fall, from 85 per cent to 60 per cent of that offered by the index.

Fergus McCarthy, head of UK and Ireland intermediary distribution for parent company BNY Mellon Investment Management, said “inflated historic yields” on Asian equity indices had limited the number of stocks available for inclusion in the fund.

“In recent years, the dividend outlook for some companies in Asia excluding Japan has become more challenged,” he said.

“We believe that, in certain industry sectors, the ability of companies to sustain dividend distributions in line with their historic practice has become increasingly unrealistic.

“We believe that the proposed modifications to stock-level yield discipline and fund-level yield target will expand the quality of the investible universe and allow the Asian Income fund to continue to deliver superior total returns across a broader range of market conditions.”

According to FE Analytics the fund, which has been managed using a team approach following the departure of Jason Pidcock last year, has shed 3.1 per cent over 12 months, compared with a 7 per cent drop for the IA Asia Pacific ex Japan group.