Investors are spoilt for choice when it comes to investing in Asian funds with an income mandate.
On the open-ended side, we like Newton Asian Income, one of the few open-ended, income-focused funds investing in the Asia Pacific ex-Japan region with a track record of more than five years (see last week's IC fund tip). We also favour Schroder Asian Income Maximiser which delivers around 7.1 per cent yield on a quarterly basis. "This fund not only delivers a rather higher income stream than is available from the underlying dividends alone but also the mechanics of the covered call sales tends to reduce the volatility a little, which could take some of the sting out of the risks inherent in investing in these markets," says Glyn Williams of Yellow Capital Wealth Management.
Other options include Schroder's ordinary Asian Income fund which yields 4.34 per cent and Invesco Perpetual's recently launched Asian Equity Income fund, which aims to deliver around 3.6 per cent yield payable twice yearly.
Mr Williams says a combination of these funds can provide investors with a broad spread of dividend dates that can be used to achieve a regular monthly income, spread evenly throughout the year.
You might prefer one of three Asian income investment trusts but you won't be picking up a bargain as all are trading on premiums to net asset value: Aberdeen Asian Income, Henderson Far East Income and Schroder Oriental Income have yields ranging from 3.5 per cent to 4.7 per cent. "There is no question that capital returns haven't been sacrificed by holding these funds in the long term. None is trading on discounts beyond 1 per cent which is an indication of their popularity. All the managers are experienced and research is fundamentals based," says Tim Cockerill of Ashcourt Rowan.
As for passive exchange-traded funds (ETFs), Mr Williams likes iShares EPRA/NAREIT Asia Property Yield, which has been delivering around 3 per cent from Asian property. "It has enjoyed a good run since the market bottomed in 2009, although it has fallen along with many Asian investment funds so far this year," he says.
A recent launch in the ETF space is db x-trackers MSCI AC Asia Ex Japan High Dividend Yield Index ETF which offers exposure to an index-tracking basket of companies that have been screened for their dividend suitability. Securities entering the index must have a dividend yield at least 30 per cent higher than the dividend yield of the MSCI AC Asia ex Japan Index.
