Jupiter Asset Management will launch an Asian Income fund next week that aims to generate income and capital growth over the long-term.
The fund will invest primarily in equities and securities of companies listed or located in the Asia Pacific region, excluding Japan. Managed by Jason Pidcock, who ran Newton’s Asian Income fund from 2004 to 2015, this product is expected to be overweight on Australia and New Zealand. Exposure to Asian emerging markets such as Philippines is also expected.
The Asian Income fund will be benchmarked against the FTSE All World Asia Pacific ex-Japan index and will involve a bottom-up stock picking approach. The fund will have a tighter holding with 40-50 large-cap holdings.
While at the beginning, the fund will have more exposure to developed markets, it plans to gradually introduce emerging economies into its portfolio after a careful research of their economic and political situation.
The fund has an estimated gross yield of 4.25 per cent pa. Even though the fund will have exposure to non-sterling markets, the manager has said no gearing, derivatives or hedging will be involved. He expects companies to have a natural hedging in place.
Comment:
UK investors often find themselves looking outside the region for better yields. Asian markets have often been an attractive option, especially now that the concerns over a Chinese slowdown have started to calm down.
Jupiter’s Asian Income fund provides a diversified portfolio to investors by investing in a mix of developed and developing markets within the Asia Pacific region.
Despite the crash in commodities markets, the fund is optimistic on the Australian market and aims to have a higher exposure to this market in the beginning. The fund’s manager believes Australia is much more stable than other commodity-driven countries like Russia. The Australian dollar has performed well since September and is up against the US dollar, while most are down.
The fund will have exposure to general insurance, telecoms, property and infrastructure in Australia. The manager is also very optimistic on the Philippines due to its stable economy and a sound political system at the moment.
Mr Pidcock has a solid, but unspectacular record at Newton, slightly underperfoming his benchmark. However, FE’s profile highlights his stock picking and a tendency to outperform peers in falling markets.
While investments will be underpinned by a research process, the biggest risk for the fund is market events. Emerging markets are dependent on both domestic and external factors such as oil prices and monetary policy tightening from the US Federal Reserve. This puts the fund at a greater risk of volatility.
