Newton Asian Income
Income-focused funds investing in the Asia Pacific ex-Japan region are rare but we think Newton Asian Income is a strong choice.
Newton Asian Income fulfils these criteria. Jason Pidcock has spent his entire 15-year career investing in Asia Pacific ex-Japan equities; he is also backed up by a strong team. Ewan Markson-Brown and Zoe Kan not only bring an average of 7.5 years experience to the table but their skills are complementary; Markson-Brown has small-cap and Indian equity expertise, Kan focuses on Korean and Chinese equities and Pidcock specialises in the Australasian region. The team is supported by the 21-strong career analyst bench at Newton, a division of the firm of which we think highly and this gives us further confidence in the offering.
We like the fund’s comprehensive strategy. Pidcock follows Newton’s thematic process. Given the fund's yield requirement, however, some themes are difficult to play. Pidcock and his team thus have to unearth their own ideas beyond those on the global recommended list, although they can direct these to an analyst for further investigation prior to buying. Pidcock only considers a stock if its prospective yield is 35% higher than that of the FTSE AW Asia Pacific ex-Japan Index which leaves him with a universe of up to 800 stocks. A stock is sold when its yield falls 15% lower than that of the index, in keeping with the yield discipline seen across all Newton’s income-targeting funds; it is a discipline which has proven to be well executed across the board. The analysts’ bottom-up fundamental analysis ensures managers aren’t attracted to stocks that only look good on a yield basis. Furthermore, the yield discipline ensures Pidcock focuses his attention on those companies with robust cash flows which are likely to show some resilience during any downturns in the Asia Pacific ex Japan region.
Indeed, the Newton Asian Income has held up better than its average peer in the Morningstar Asia Pacific ex-Japan category during the year-to-date to 17 December 2008 and has also exhibited markedly less volatility relative to the category norm since its inception. This is something we like to see in an emerging markets offering, in part because the income provides a nice cushion for returns. The fund’s 12-month yield is also above the average yield of an income-focussed peer group investing in the region.
In short, we think this fund’s experienced manager and sound and consistent strategy, bolstered by strong resources, make this fund a compelling choice for Asia Pacific ex-Japan equity exposure.
