Achieving diversified exposure to Asia
Notwithstanding the growing tensions over trade sparked by a more belligerent White House, the economic grouping which includes India, China and Southeast Asia is expected to achieve growth of 6.5% in 2018 according to the International Monetary Fund.
This compares with the global average at 3.9% and the 2.4% anticipated for the world’s advanced economies.
Investors looking to tap into this growth can to do so through a fairly large collection of funds, exchange-traded funds and investment trusts.
Picking the right Asian fund is important as these countries have less mature capital markets and developed corporate cultures making it arguably harder to avoid loss-making investments.
Making this process easier is AJ Bell’s favourite funds list. Chosen by experts, these collectives are selected for income and medium to long-term growth with an emphasis on value, track record and quality fund management.
In this article we look at a trio of funds which make the cut, profiling each of them in turn.
Invesco Perpetual – Asian (BJ04DS3)
FUND SIZE: £2.36bn
ANNUAL FEE: N/A
TOP HOLDINGS: JD.COM / SAMSUNG ELECTRONICS / BAIDU
Fund manager William Lam became the sole manager of Invesco Perpetual Asian (BJ04DS3) in May 2017 and uses a value approach, seeking out stocks he believes to be trading at below their fair value and holding them until the market realises their full potential and the price increases.
The manager is very experienced in this style of investing and it has produced good results over time, although investors should be aware that over short time periods this style may be out of favour and this could lead to underperformance.
Invesco Perpetual Asian aims to achieve capital growth in Asia and Australasia, excluding Japan, with top holdings including Chinese e-commerce giant JD.com, Samsung and Chinese internet search provider Baidu.
Jupiter Asian – Income (BZ2YMT7)
FUND SIZE: £564.4m
ANNUAL FEE: 0.75%
TOP HOLDINGS: SANDS CHINA / SAMSUNG ELECTRONICS / HON HAI PRECISION INDUSTRY
This may be a relatively new fund launch for Jupiter, but its manager Jason Pidcock is a seasoned practitioner of Asian income investing. Revered in fund management circles for his Asia investment nous, Pidcock’s well-defined investment process involves seeking out high quality companies that can increase their dividends as they grow over time.
He has a fundamentals-based investment strategy for Jupiter Asian Income (BZ2YMT7), backing companies which have scalable and sustainable business models, a commitment to sharing profits with shareholders through dividends and which trade at a compelling valuation too. This is a strong offering for investors who wish to benefit from the region’s long-term income and growth potential.
Pidcock has put money to work with the likes of gaming resorts developer and operator Sands China, Korean national champion Samsung Electronics and Taiwan-based computers-to-consumer electronics maker Hon Hai Precision. Research firm Square Mile says the portfolio of 40-to-50 companies ‘will include stocks that have higher dividend yields than the market as well as lower yielding names with compelling growth prospects.
As well as reviewing the macroeconomic environment across the region, Pidcock has access to the expertise of Jupiter’s wider emerging markets team and the broader skills of the global equity team. All this helps him to build a better picture of where a company is positioned in its market.’ tewart Investors A
Pacific Leaders: (3387476)
FUND SIZE: £8.3bn
ANNUAL FEE: 0.85%
TOP HOLDINGS: TATA CONSULTANCY SERVICES / MAHINDRA & MAHINDRA / CSL
Long-term growth of capital is the mission of Stewart Investors Asia Pacific Leaders (3387476) , which invests in large and mid-cap companies incorporated, listed or conducting the bulk of their business in the Asia Pacific region (ex. Japan, but including Australia and New Zealand).
Managed by one of the most highly regarded teams investing in the region, with David Gait and Sashi Reddy the named co-managers of the £8.3bn OEIC, the investment process is underpinned by a strong quality mantra, while the companies it invests in generally have a market value of at least $1bn.
Gait and Reddy’s approach means the fund can sometimes lag in very strong markets, but it tends to be less volatile than other funds investing in the region and over the long term has produced excellent results for investors, boasting ten year annualised returns of 12.6%.
Leading portfolio positions include IT services titan Tata Consultancy Services, cars-to-tractors maker Mahindra & Mahindra and India financial outfit CSL. (JC)