- This fund combines exposure to faster-growing Asian markets with a regular income
- It maintains a bias to Australia, where the manager has identified companies with superior dividend prospects
- We recently met the manager for an update and maintain our conviction in the fund’s long-term prospects
The Jupiter Asian Income Fund combines exposure to the exciting growth potential of Asian markets with a regular income. A focus on dividend-paying companies located in developed Asian economies, such as Australia and Singapore, differentiates the fund from many of its peers which are focused on capital growth and biased to emerging Asian markets. The fund has the flexibility to invest in emerging markets however, which makes it higher risk.
The fund launched just over a year ago and we recently took the opportunity to meet Jason Pidcock, the fund’s manager, for an update on progress so far. We maintain our long-term conviction in the manager and the fund’s future prospects. With a career spanning more than 20 years, our analysis shows Jason Pidcock has a good track record of stock picking. He remains focused on finding companies with the potential to grow their earnings and dividends over the long term; the fund currently yields 3.8%, although this should not be seen as a reliable indicator of future income.
The fund currently features on the Wealth 150+ list of our favourite funds with the lowest ongoing charges. Please note the Vantage platform fee of up to 0.45% p.a. also applies.
How has the fund performed since launch?
Following a difficult 2015, Asian markets staged a recovery over the past year. Since its launch in March 2016, the fund has benefited and delivered an attractive return of 34.4%*, although this is behind a return of 43.6% for the broader Asian market. Please note this is over a short timeframe and past performance is not a guide to future returns.
|Annual Percentage Growth|
| March 12 -
| March 13 -
| March 14 -
| March 15 -
| March 16 -
|Jupiter Asian Income||n/a**||n/a**||n/a**||n/a**||29.0|
|FTSE AW Asia Pacific ex Japan||16.7||-6.5||20.0||-7.8||36.8|
Past performance is not a guide to the future. **Full year performance data not available. Source: *Lipper IM to 31/03/2017
The fund’s lack of exposure to some of the better-performing and more economically-sensitive areas of the market, such as banks and commodity-related industries, weighed on returns. Companies in these sectors tend to lack the sustainability of earnings growth that Jason Pidcock seeks. Commodity prices, for example, can be volatile and lead to unpredictable earnings for miners and oil & gas companies. He has instead continued to focus on more cash-generative companies that he believes have greater growth prospects and stronger balance sheets.
The manager’s prudent investment approach has proven a success over the longer term. His focus on quality companies with good earnings growth prospects means the fund could lag a rapidly rising market, but we would expect it to hold up well during periods of market weakness, which would put the fund in a stronger position when markets rise.
How is the fund positioned?
Jason Pidcock has reduced the number of investments held since the fund’s launch and tilted the portfolio towards his highest-conviction ideas. The fund is a concentrated portfolio of 38 stocks, which means each investment can have a significant impact on returns, although this is a higher-risk approach.
Telstra has been sold from the portfolio as the manager believes the Australian telecoms provider will be unable to grow its dividend to the same extent as it has previously. He currently has greater conviction in other telecoms providers, such as Singtel, based in Singapore. Australian insurance group IAG was also sold after its shares performed well and are no longer as attractively valued. The fund maintains exposure to other insurance companies based in the country, such as Suncorp.
Overall the fund maintains a bias to Australia, where one third of the portfolio is currently invested. Jason Pidcock feels the Australian market is too easily dismissed by other investors who believe the country is overly reliant on commodity exports. In the manager’s view, the country offers more than this and he invests across a range of companies, including real estate investment companies, retail groups and toll road operators. Many offer higher yields than businesses located in other regions of the world, along with greater dividend growth prospects in his view.
Asian markets are more resilient to global economic shocks than they have been in the past, according to Jason Pidcock, although he is aware of potential headwinds. Some investors are concerned Donald Trump's protectionist policies could stifle global trade and damage the export markets of Asian and emerging economies. The manager is less concerned, however. While Asian exports were once reliant on Western demand, over half of Asian trade now takes place within the region and domestic consumption continues to rise.
Going forwards the manager remains focused on countries he believes offer greater political stability, good levels of corporate governance and growing economies. As Asia continues to develop its dividend-paying culture, the fund remains poised to benefit. However like all investments the fund can still fluctuate in value.
Please note the fund’s charges can be taken from capital, which can increase the yield but reduces the potential for capital growth.