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Fund Review: Asian Income


The Henderson Global Dividend Index shows Asian dividends suffered a setback in 2015, falling to $110.3bn (£78bn) – or a drop of 5 per cent year on year – with the effects of lower exchange rates blamed.

But the index pointed to a more healthy 14 per cent dividend growth on an underlying basis.

Alex Crooke, head of global equity income at Henderson Global Investors, emphasises: “US dollar strength disguised excellent dividend growth for most regions, making 2015 a good year for income investors. While dollar-based investors would have suffered, exchange rate differences tend to dissipate over time.”

Dividend payouts from Australia declined last year by 7.6 per cent to $46.5bn, with the plunging Australian dollar the reason behind the fall. But against this backdrop Australian banks increased their payouts. Hong Kong dividends were also down by 14.6 per cent to $34.5bn last year.

South Korean and Taiwanese dividends performed much better, however, up 20 per cent and 30 per cent respectively, according to Henderson’s Index. Samsung Electronics and Taiwan Semiconductor are the largest payers in these countries.

Jason Pidcock, who launched his Jupiter Asian Income fund this month having run the Newton Asian Income fund until last year, suggests there are plenty of companies in Asia with long track records of paying dividends, and in countries such as South Korea, which has historically not paid out much to investors, the culture is improving.

In an interview with Investment Adviser, he noted over the past five years the region’s dividend payout ratio has gone up by 1 per cent each year to 18 per cent.

He suggests: “It may not continue to improve at that same steady pace, but at the same time I don’t think it will go backwards either.”


Newton Asian Income

This £2.1bn fund has been run by a team since the departure of previous manager Jason Pidcock to Jupiter Asset Management. Rob Marshall-Lee, head of emerging and Asian equity at Newton, oversees the team, which has clocked up several years of outperformance. The fund had to deal with sizeable outflows since Mr Pidcock’s departure, but 2016 performance has been strong, helping the fund to outperform the IA Asia Pacific ex Japan sector over three years. The largest country weighting in the portfolio is Australia at 36.6 per cent, while financials is the biggest sector weighting, accounting for 29.4 per cent.

Aberdeen Asian Income

The Asian equities team behind this £355m investment trust admits January “was a rough start to 2016 for Asian equities”. Figures from FE Analytics show the trust generated a loss of 16.5 per cent in the year to March 2, while the MSCI AC Asia Pacific ex Japan index was down 10.3 per cent in the same period. This trust has outperformed in the longer term, delivering 123.4 per cent in the past 10 years, against the index’s rise of 94.8 per cent, but underperforming the AIC Asia Pacific ex Japan Equities sector’s average of 156.2 per cent. Singapore is the largest country weighting at 25.5 per cent, followed by Australia at 17.2 per cent.


Schroder Asian Income

Richard Sennitt has managed this £727m fund since November 2001 and seeks Asian companies offering attractive yields and growing dividend payments. The portfolio has a 24.8 per cent allocation to Hong Kong, while Australia accounts for 19.8 per cent of the fund. Among its top 10 holdings are Taiwan Semiconductor Manufacturing, HSBC Holdings and China Mobile. Like most other Asian income funds in the past 12 months, the fund did not generate a positive return. But over five years to March 2 it returned 36.7 per cent, against the IA Asia Pacific ex Japan sector average of just 12.5 per cent, according to FE Analytics.

Mr Pidcock notes some of the investors showing interest in his new fund prior to its launch have been underweight Asia, but are now considering a more neutral position in the region “because valuations look more appealing than they did nine months ago”.

Tony Jordan, manager of the New Capital Asia Pacific Equity Income fund, observes many managers running global funds have their lowest allocation to Asia for a long time – in some cases since the financial crisis.

He acknowledges Asian markets are currently being driven by sentiment but believes active stockpickers should fare better.

For those investors in Asian income funds, the income element may be the key to riding out some of the short-term market volatility.

Mr Crooke adds: “The importance of dividends as a driver of total shareholder return was highlighted in 2015 where income almost entirely compensated investors for falling share prices.

“The recent stockmarket volatility underlines the continued value of income as a source of return.”

In this special report