Get cheap emerging markets income with Schroders

But if you're prepared to hold your nerve, now could be a good time to get in for a cheap long-term play. Some countries will be hit harder than others, with developed markets tipped to fare much better than smaller economies. Even so, everything associated with emerging markets is being painted with the same black paint. This creates an ideal environment for a bargain hunter.

For those looking to cheaply diversify the income streams in their portfolio, the Schroder Oriental Income Fund (SOI) is trading at 175.5p, a 2.22 per cent discount to its underlying net asset value. However, its average premium over the past 12 months has been 1.81 per cent, so it is looking like very good value at the moment.

There are two other Asian income investment trusts: Aberdeen Asian Income (AAIF) and Henderson Far East Income. (HFEL). All three benefit from experienced managers, are similar in size and boast attractive yields, but they often trade at high premiums. We last tipped SOI in February 2012 at 159.5p as the most cost-effective buy of the three and this looks the case again.

The fund is mainly invested in "developed developing" countries, such as Singapore (19.1 per cent), Hong Kong (16.9 per cent) and Taiwan (14.3 per cent). And its largest regional allocation is Australia, with a 24.1 per cent allocation. It's well diversified with 69.4 per cent of the fund sitting outside its top 10 holdings, which include Fortune Real Estate, Taiwan Semiconductor Manufacturing, HSBC and Sydney Airport (see table below).

Fin Bodman, closed-end fund researcher at Investec, says these regions aren't "danger zones", and says the Schroders team is "a safe pair of hands".

Manager Matthew Dobbs has over 30 years' industry experience and has been at Schroders since he started there as an analyst in 1981. He also has a track record of outperforming his peer group as an emerging markets fund manager.

And this fund has thumped its index (MSCI AC Asia Pac ex Japan USD index) over one, three and five years. Over one year it returned 14.56 per cent while the index only managed 7.9 per cent. Over three years it returned 51.19 per cent compared with 19.74 per cent from the index. And over five years investors have seen an impressive 133.58 per cent return, soaring way above the index, which only managed 57.21 per cent.

Gordon Smith, fund analyst, Killik & Co, is bullish on the fund and describes it as a "consistent performer". He particularly likes the fact that its dividend payment has been increased by an average of 5.5 per cent per year since inception and also points to the fact that it holds revenue reserves of 5.9p (90 per cent of last year's payout).

He said: "One of the attractions of equity income investing in Asia is to achieve increased diversification of the sources of income within a portfolio. On a market capitalisation basis the Asia Pacific ex Japan region makes up 13 per cent of the global equity market. But if you're looking for stocks yielding over 4 per cent, this region accounts for more than 30 per cent of what's out there."

Both the number of stocks paying dividends and the rate of dividend growth has risen faster in Asia than in other global regions over the past 10 years and this fund is a prime opportunity in the space. Grab it now while it's cheap. Buy.

SCHRODER ORIENTAL INCOME (SOI)