Asian income is a sector that is starting to pick up, with approximately nine IMA-listed funds and three investment trusts covering the areas of Asia, Far East or Oriental income.
Some might consider Asia, particularly the emerging market areas of the region, to be lower on the dividend-paying scale than say Europe or the UK, yet according to figures from the Henderson Global Dividend index, dividend growth in the Asia Pacific region has increased 79 per cent since 2009.
Emerging markets have recorded the fastest growth, and combined with Asia Pacific, these geographies accounted for approximately 25 per cent of global dividends in 2013.
Adrian Lowcock, senior investment manager at Hargreaves Lansdown, notes: “Since the crisis, equity income has become more of a global theme. Dividends have grown rapidly in Asia and emerging markets. To benefit from this growth investors need to diversify their equity income exposure.”
Key areas for dividend growth, according to the research, include China, which accounted for 20.4 per cent of the emerging market dividend growth in 2013, and within Asia-Pacific a top dividend payer is Australia. The country has grown its payouts by roughly 89 per cent, in US dollar terms, between 2009 and 2013, placing it in the top 15 fastest-growing countries in the world.
Meanwhile, Hong Kong was the second largest dividend player in the wider region with dividends worth approximately $33bn (£19.9bn) in 2013.
Of the IMA-listed funds specialising in Asian, Far Eastern or Oriental income, the best performing for the three years to March 10 2014 is the Newton Asian Income fund run by Jason Pidcock, with a return of 25.39 per cent. Followed by Schroder Asian Income managed by Richard Sennitt, with a return of 22.72 per cent. Perhaps unsurprisingly both funds’ two largest geographical weightings are to Australia and Hong Kong.
More recently, however, Asian income funds have suffered with the best performer for the year to March 10 – the Smith & Williamson Far Eastern Income and Growth fund – just delivering a positive return of 0.15 per cent, according to FE Analytics.
Jon Beckett, fund analyst for the Chartered Institute for Securities and Investments, points out that picking the right Asian income fund – or any fund – is not about picking winners from the three-year performance table. He warns: “That is an easy trap to fall into, one perpetuated by the lack of a dedicated sector. Likewise distinguishing managers from marketing material is difficult because so many focus on similar cyclical and secular themes – demographics, reform and growth potential. The sector remains dominated by an Asia ex-Japan approach but opportunities for Asia plus Japan funds will exist post Abenomics.”
PICKS
Smith & Williamson Far Eastern Income and Growth
Managed by Jane Andrews and Amanda Xu this £24.9m fund has struggled in the medium to long term compared with its specific Asian income peers. However, in the 12 months to March 10 2014, it is the only Asian income focused fund to have delivered a positive return. Its largest geographical weighting is to Japan, suggesting it is currently reaping the rewards of the positive Abenomics story. The concern is whether this run of performance will continue if Japan starts to struggle or the rest of Asia catches up.
Schroder Oriental Income
This £365.5m investment trust has been managed by Matthew Dobbs since launch in July 2005 and has delivered strong returns in the medium and long term with a five-year return of 202.51 per cent to March 10, and a three-year return of 26.72 per cent. This has placed it in the Investment Adviser 100 Club for the first time in 2013. The shorter-term performance has dipped with a 12-month loss of 16.24 per cent. The largest geographical weighting in the portfolio is to Australia at 24.3 per cent.
EDITOR’S PICK
Newton Asian Income
Run by Jason Pidcock, with Caroline Keen as alternate manager, this is one of the largest offerings in the Asian income sub-sector with approximately £4bn assets under management. The medium- and longer-term performance also tops its income peers with a five-year return of 159.61 per cent. Like most of the funds in this area, however, shorter-term performance has dipped with a 12-month loss of 11.98 per cent. But with such a strong track record, and healthy weightings to Australia and Hong Kong, this is likely to make a full recovery.
