Equities  

Old Mutual Asian Equity Fund sets sights on income

Old Mutual Global Investors has announced its intention to refocus the strategy of the group’s Asian Equity Fund.

The $212m (£135.7m) fund – which will be renamed the Old Mutual Asian Equity Income Fund, subject to shareholder approval – will now focus on income as well as capital growth. It will invest in small, mid and large cap businesses.

The fund, which is a sub-fund of the Dublin-domiciled Old Mutual Global Investors Series umbrella fund, is managed by Josh Crabb, head of Asian Equities at OMGI, and a team based in the firm’s Hong Kong office.

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Mr Crabb joined the group last year from BlackRock and has been running the fund since October.

Warren Tonkinson, global head of distribution at OMGI, said: “In this environment the demand for top-performing income funds that also deliver growth is greater than ever. By adapting the Old Mutual Asian Equity Fund into an income fund, we are meeting the demands of clients for access to an income-producing strategy run by an award-winning manager with an outstanding track record.”

Provider view

Mr Crabb said: “As the worldwide population ages, the search for income, and in particular equity income, is at the top of the investment agenda. By evolving the Old Mutual Asian Equity Fund into an income fund we are aiming to meet the demands of those investors who look to receive an inflation-proofed income without sacrificing their capital growth.

“The Asia Pacific region is one of the world’s largest-growing markets in terms of dividends and growth, yet Asian equity income funds are vastly under-represented in terms of total assets in income-producing strategies. We believe this fund can provide investors with an attractive alternative to cash and sovereign bonds, which offer relatively little return.”

Adviser view

Carl Melvin, director of Renfrewshire-based Affluent Financial Planning, said: “I think there are three main issues with this solution. The first one relates to what is happening in China, with vast sums of money being wiped off the Chinese stock market. This will undoubtedly spook investors, who would be reluctant to invest in Asian equities in the light of this.

“Secondly, investors usually view the Asian equity market as an investment for growth. I think Old Mutual will have to convince investors that the market is also suitable for income strategies. I also think that there is a cultural difference when it comes to eastern companies paying dividends to its investors. I am not too sure if many eastern companies would offer dividends.

“Finally, I think investors need to look at the risk associated with the fund compared with a fund which invests in UK equities for example. They have to ask themselves if it is worth taking the risk for a potential higher return. The investors could easily see a reduction in their initial investment.

“I think Old Mutual might have an uphill struggle on their hands.”