A relatively large weighting to Australia in the portfolio has been a major driver of the performance of the £122.8m Legal & General Asian Income Trust fund, in spite of the weakness of the Australian dollar. This leaning helped propel it into this year’s Investment Adviser 100 Club of top-performing funds.
Paul Hilsley, who has managed the fund since launch in November 2008, notes that while Australia is the largest country weighting at 32.16 per cent, the portfolio has also held a number of companies that have benefited from the Australian dollar reversal and holdings that were “geared to the domestic recovery, following further interest rate cuts and the change of government in September”.
The fund aims to provide both a high level of income and capital gains from equities within the Asia Pacific excluding Japan region.
Mr Hilsley notes: “The process and objectives have been consistent since we founded the fund. We base our investments on bottom-up, fundamental analysis and take long-term views.
“We are looking for companies with good ability to generate cash that can be paid out as dividends, plus management who are committed to make these payments.”
The manager adds that the scale of the team provides access to corporate management, both in London and in the region, with Mr Hilsley adding: “We make the most of this to fully understand what we are investing in and also to draw comparisons between peer companies. This helps us to judge relative valuation opportunities, which is key to maximising capital returns as well as income.”
Top-down factors are taken into account when looking at investments, using the resources of L&G’s in-house macro team, combined with the portfolio team’s own views.
As the fund reaches its five-year anniversary, the performance since launch on November 10 2008 to November 5 2013 has outperformed both the sector average and its benchmark index.
The return for the period is 134.9 per cent, compared with 125.68 per cent from the FTSE World Asia Pacific excluding Japan index, and 112.96 per cent average from the IMA Asia Pacific ex Japan sector.
Mr Hilsley explains: “Turnover in the fund is generally low as we believe that picking companies with the right characteristics and sticking with them for the long term produces the best results.
“We do, of course, adjust positions as fundamental views evolve or are proven right or wrong.
“This year we have reduced our exposure to some excellent performers – for example, Taiwan Semiconductor Manufacturing, which has an extremely strong business but whose yield has reduced through share price appreciation. We have also reduced exposure to Taiwanese bank Fubon Financial Holdings and Crown Casino, the Melbourne-based gaming company, whose yields are now low.”
The fund has reinvested some of this into mining firm Rio Tinto, Meridian Energy, a New Zealand renewable energy IPO, and Li & Fung, the international supply chain management company.
The fund’s shorter- and medium-term performance has been equally strong with the three-year return to November 3 of 29.9 per cent, outperforming the index return of 17.17 per cent and more than trebling the sector average of 7.88 per cent, according to Morningstar. The 12-month performance has also outperformed both the benchmark index and the sector.
Mr Hilsley explains: “This has been partly attributable to the relatively large Australian weighting.”
As the fund passes its five-year anniversary, this member of the Investment Adviser 100 Club of top-performing funds is likely to feature higher on investors’ radars as its strong track record and manager experience combine to make it one to watch.
EXPERT VIEW
JULIET SCHOOLING LATTER, HEAD OF RESEARCH, CHELSEA FINANCIAL SERVICES:
“This is a slightly more diversified fund of around 75 holdings. It’s multi-cap and is invested across a good spread of markets with around 60 per cent in more developed markets (with high weightings to Australia and New Zealand) and a quarter in emerging Asia. It has held up better than many of its peers in falling markets and performance generally has picked up considerably in the past couple of years. The yield is pretty good at 4.4 per cent (above the market average).”
