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Fund Review: Asian Income


Economists and strategists are predicting that the recent slump in the oil price might benefit the Asia-Pacific region as it is a heavy importer of the commodity.

There are also signs of favourable monetary policy in several countries, such as China, where slowing growth has been a cause for concern for some time.

There are now 10 Investment Association-listed funds directly targeting Asian income, and there are three investment trust offerings from Henderson, Aberdeen and Schroders competing to deliver income from the region.

According to FE Analytics, the Dow Jones Asia/Pacific Select Dividend 30 index has returned an impressive 57.31 per cent in the five years to January 20, although this was behind the 65.80 per cent generated by the MSCI World High Dividend Yield index.

Although, in the past 12 months the Dow Jones Asia/Pacific Select Dividend 30 index has only managed 7.32 per cent, lagging both the Russell Australia High Dividend index return of 7.94 per cent and the MSCI World High Dividend Yield’s 11.19 per cent.

Nicolas Simar, head of the equity value boutique division at ING Investment Management, notes: “Asia provides an attractive and diverse universe of high dividend-paying stocks. Over the past five years investors tracking the MSCI AC Asia ex Japan index would have seen a modest decline, with dividends being the only positive contributor to returns.”

He adds: “We expect dividends to become an increasingly important element of total returns for investors in Asian equities because companies there are increasingly focusing on alignment with shareholders, and more are initiating or increasing dividends.”

Open-ended Asian income funds have delivered mixed returns over the years. In the 12 months to January 20 only three of the 10 funds generated top-quartile returns: Guinness Asian Equity Income, Henderson Asian Dividend Income and Schroder Asian Income. In fact, the Schroder fund has achieved top-quartile performance over one, three, five and 10 years.

Meanwhile, performance of the Smith & Williamson Far Eastern Income and Growth fund has disappointed, with bottom-quartile returns over five, three and one years, with a paltry 3.17 per cent returned in the past year.

Paul Hilsley, manager of the Legal & General Asian Income Trust, says “the outlook for Asian stockmarkets remains positive given the ongoing low global interest rates, low commodity prices, the many levers Asian governments still have available to them to manage their economies and, finally, the relatively attractive valuations versus their history.”

So how should investors position themselves to benefit from the positive outlook?

Mr Hilsley adds: “Within Asia, income-focused investments, which focus on high quality and attractively valued companies, should continue to provide good exposure to this growth with relatively low volatility returns.”


Henderson Asian Dividend Income

Mike Kerley and Sat Duhra, who seek to achieve an above-average benchmark dividend yield, run this £105.22m fund. Its performance has picked up recently, delivering a top quartile 15.72 per cent return in the 12 months to January 20. Over three years the performance had dropped to second quartile, although it generated a decent 32.61 per cent return in that period. The portfolio currently has 34.4 per cent allocated to financials, making it the largest sector weighting.

Invesco Perpetual Asian Equity Income

Stuart Parks and Tim Dickson run this £30.22m offering. Their objective is to take advantage of the growth in domestic demand, with a focus on firms in Asia and Australasia that “possess strong competitive advantages with an ability to grow or maintain their dividend payments”, according to its factsheet. The portfolio has 21.69 per cent in Hong Kong, followed by 16.22 per cent in Australia and 13.88 per cent to China. The fund has performed relatively well, returning 28.76 per cent in the three years to January 20 and 15.60 per cent in the past 12 months.


Schroder Oriental Income

This £428.4m investment trust, run by Matthew Dobbs, has clocked up several years of outperformance. It is heavily weighted to Hong Kong and Australia, at 23.8 per cent and 23.7 per cent of the portfolio respectively. Singapore accounts for 16.2 per cent of this vehicle, followed by Taiwan at 12.6 per cent. Fortune Real Estate investment trust is the largest holding with a 5.6 per cent weighting. This trust has remained top quartile in the AIC IT Asia Pacific ex Japan Equities sector over one, three and five years. In the five years to January 22 the investment trust returned an exceptional 97.01 per cent to investors, against a sector average of 67.74 per cent.

In this special report