Join our community of smart investors

Generate income and growth with Jupiter Asian Income

Jupiter Asian Income Fund's total return approach offers good growth and income from a fast-growing region
February 23, 2017

Asia remains one of the fastest-growing regions in the world, boosted by young populations and the steady growth of a wealthy middle class. It also offers a diverse universe of global businesses - many of which have well-established dividend payment cultures. A way to tap into the potentially higher income yields available in these markets is Jupiter Asian Income Fund (GB00BZ2YMT70).

IC TIP: Buy at 127.2p
Tip style
Income
Risk rating
High
Timescale
Long Term
Bull points
  • Good manager track record
  • Asian growth
  • Defensive slant
  • Attractive yield
Bear points
  • Australia concentration

Although the fund is only a year old, it is run by highly regarded Asian income manager Jason Pidcock. Mr Pidcock established a successful record at his previous fund, Newton Asian Income (GB00B8KPW262). Between its launch in November 2005 and his departure in April 2015, Newton Asian Income returned just under 200 per cent, compared with FTSE Asia Pacific ex Japan Index's 169 per cent return over that period and the Investment Association (IA) Asia Pacific ex Japan sector average of 152.2 per cent.

 

 

Unlike with his former fund, Mr Pidcock is not restricted by single stock yield requirements. This means he is able to take a flexible approach to delivering Jupiter Asian Income's total return objective, aiming to strike a balance between capitalising on higher yielding opportunities and potential high dividend-payers of the future. As of 31 January, the fund had a yield of 3.9 per cent.

The manager invests via a top-down and bottom-up approach - he considers the macroeconomic environment across the region as well as each company's individual attributes. Company meetings and research by the wider emerging markets team at Jupiter also inform his investment decisions.

The fund has a relatively concentrated portfolio of 40 stocks, with financials, real estate and industrials making up more than 50 per cent of the portfolio.

Mr Pidcock likes to invest in large, liquid companies with reliable dividends, that can deliver both income and growth. About two-thirds of Jupiter Asian Income's portfolio is in companies with a market capitalisation of more than $10bn (£8bn), with the remainder in medium-sized companies with a market cap of between $2bn and $10bn.

The focus on large companies gives the fund a defensive slant, which is bolstered by its high weighting to developed markets in the region, such as Australia, its largest country exposure at 32.3 per cent of assets. That country is a strong source of returns for the fund, while companies listed in emerging markets such as the Philippines (6.5 per cent of assets) are held for their growth potential.

"Jupiter Asian Income benefits from an experienced manager with a proven, consistent process and a strong track record," says Darius McDermott, managing director of research company FundCalibre. "The fund targets a total return via income-producing companies that pay a yield, and doing this makes it less volatile and risky."

FundCalibre has recently rated the fund as 'Elite' - a stamp of approval that it bestows on what it considers to be the top investment funds, where it believes the managers can consistently deliver positive value over time. FundCalibre had initially adopted a wait-and-see attitude to the new Jupiter fund, as they weren't sure whether Mr Pidcock would be able to continue outperforming in a different setting. However, Mr McDermott says he is now convinced that the manager move has been successful, especially as the fund has outperformed Mr Pidcock's previous fund in the year to date.

But, despite Mr Pidcock's strong history of alpha generation, Jupiter Asian Income's overweight position in Australia means performance could be affected if there is a downturn in the Australian market, adds Mr McDermott. And its exposure to Asian and emerging markets means it is higher risk and potentially more volatile than an equity income fund focused on developed markets such as the UK.

However, if the large companies the fund invests in maintain or grow their dividends, it should benefit. And the fund is more defensive than many other Asian and emerging market funds.

So, if you have a long-term time horizon and want relatively defensive Asian equity exposure, Jupiter Asian Income's experienced manager and focus on dividend yield and growth make it an attractive opportunity. Buy. EA

Jupiter Asian Income (GB00BZ2YMT70)

Price127.2pSet-up date02/03/2016
IA SectorAsia Pacific Excluding JapanManager start date02/03/2016
Fund TypeUnit trustOngoing charge0.98%
Market Cap£437.8mYield 3.9%
No of Holdings40*More details www.jupiteram.com

Source: Morningstar as at 20/02/17, *Jupiter Asset Management as at 31/01/2017

 

Top 10 holdings as at 31/01/2017 (%)

Samsung Electronics 4.8
Taiwan Semiconductor 4.4
Sands China 4.2
Tencent Holdings 3.9
AIA Group 3.6
Hon Hai Precision 3.5
NWS Holdings 3.3
The Link REIT 2.9
Macquarie Group 2.8
Ascendas REIT 2.7

Source: Jupiter Asset Management

 

Geographic breakdown as at 31/01/2017 (%)

Australia32.3
Hong Kong 14.0
Taiwan12.2
Singapore 10.4
South Korea 7.4
Philippines6.5
China5.9
New Zealand 5.3
Thailand 3.6
Malaysia 1.9
Cash0.6

Source: Jupiter Asset Management

 

IC Tip rating

Tip styleIncome
Risk ratingHigh
TimescaleLong term