The Schroder Asian Income is a new entrant into the Asia Pacific ex Japan space but has made a name for itself for its strong performance thus far. We take a deeper look into the fund’s investment strategy and highlight four reasons for investors to consider making an investment in the Schroder Asian Income.
1. Broad Exposure to Yield in Asia
The investment strategy of the Schroder Asian Income is to provide income and capital growth over the medium to long term through investing in the Asian space. Though not explicitly stated in the fund’s investment mandate, the fund targets a dividend payout rate of 6% per annum, to be paid out on a monthly basis.
To this end, the fund is invested in a portfolio comprising of Asian equities and Asian high-yield bonds. Currently the fund's high-yield bond portfolio yields about 6.84% while its equitites portfolio is yielding 6.21%. The fund also has a part of its portfolio invested in cash instruments, giving the portfolio a current portfolio yield of 6.19%.
Source: Schroders, as at 30 Mar 2012
2. Flexible Investment Strategy for Enhanced Returns
The overall portfolio of the Schroder Asian Income will be actively managed, with allocations to equities and fixed income ranging from 30 to 70% depending on economic conditions. In addition, the fund also has the flexibility to invest up to 10% of its portfolio into other asset classes such as commodities and real estate securities to enhance its returns.
This strategy gives investors a balanced exposure to both Asian equities and Asian fixed income, with active management to adjust allocations to take advantage of prevailing economic conditions.
3. Active Currency Management from SGD-Perspective
The fixed income segment of the Schroder Asian Income is managed from a SGD-perspective, meaning that any currency expectations are managed to favour the local investor. The fund also actively manages its currency exposure and counts currency strategies as one source of its returns.
4. Strong Performance Since Launch
Chart 1: Performance of Schroder Asian Income since launch
Though the Schroder Asian Income was only launched on 24 October 2011 giving it a mere six month track record, the fund has turned in a strong performance thus far. Since launch, the fund has achieved a total return (NAV increase plus dividends) of 6.0%, suggesting that it is well ahead in its target to pay out 6% in income per annum (as of 5 April 2012).
Investors who are drawn by the dividend-paying feature of the fund will be pleased to know that the Schroder Asian Income pays out cash dividends monthly.The fund has in fact paid out dividends a total of four times since its launch, with dividend rates ranging from SGD 0.00493 to SGD 0.006122 per unit.
[Note: It was previously mentioned that the fund's dividends are automatically reinvested. This is incorrect; dividends are actually paid out in cash and the article has since been amended.]
The Schroder Asian Income is an actively managed fund that gives investors exposure to the strong growth potential in both Asian fixed income and equities. Its flexibility to invest in other asset classes allows the fund to take advantage of changing economic climate and its active allocation strategy allows its managers to maximise the fund’s yield and total return. Investors who are seeking Asian exposure may consider adding the Schroder Asian Income Fund to their portfolios.
Idea of the Week: Choosing the Right Asia Fund for Your Portfolio - Part 2 [2 March 2012]
Idea of the Week: 3 Fund Selection Myths De-Bunked! [17 Feb 2012]