Schroder Asian Income fund page - The Adviser Centre

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Schroder Asian Income

IA Sector:

Asia Pacific excluding Japan

Asset Manager:

Schroders

Asset Manager Website:

www.schroders.com

Asset Manager Factsheet:

An income-orientated, Asia Pacific ex Japan equity fund. The approach is research-intensive, with the manager aiming to deliver an annual yield of 3.5% to 4% over rolling 3-year periods. Within its sector, the fund features in our 'Dividend Focus' category.

Opinion, Characteristics & Utility

Opinion

This Recommended fund is under the stewardship of a highly experienced, Asian-trained fund manager, who is supported by a very well-resourced team at Schroders.
The manager maintains a well-balanced portfolio but is cognisant of the benchmark. As such, we think it successfully avoids the value trap risk that can be a feature of yield-focused strategies.
As an access point for Asian yielding equities, we feel that the fund has proved its worth.

Characteristics & Utility

The fund is focused on providing income in the Pacific markets. This has traditionally offered investors a less volatile way to access this higher growth region.
The fund is benchmark-unconstrained but nonetheless, the manager is aware of the index when building the portfolio. It tends to have structural underweights in low yielding markets, such as South Korea.
The fund is diversified across stocks and sectors while maintaining its focus upon delivering an attractive yield.
The yield objective reinforces the valuation-conscious approach and the focus upon quality companies. As such, relative performance is typically under pressure when the market is focused upon growth or lower quality stocks. Highly momentum-orientated markets are also typically a challenge.

Risk Commentary

The fund's KIID Synthetic Risk and Reward Indicator (SRRI) is 5. This is a regulatory measurement that is, where possible, calculated from the volatility of its weekly performance over a five-year period. A score of 5 means the fund's historic volatility is between 10% and 15%.

The fund’s five year standard deviation is significantly lower than the peer group and its benchmark. This very much reflects the yield strategy itself, which typically results in a portfolio with lower beta characteristics. Different share classes could have differing SRRI scores.

Description

Investment Team

Richard Sennitt is the lead fund manager on the fund and he works closely with Abbas Barkhordar. Mr Sennitt has been at Schroders since graduating from Oxford in 1993. He has been involved in managing Asian equities since then and also works on global small-cap equities. Mr Barkhordar joined Schroders in 2007 and has worked closely with Mr Sennitt for over a decade.

Investment Philosophy

The manager believes that the Asian regional markets are highly inefficient and that an intensive, proprietary research process can provide a significant information advantage. He also believes that the momentum in stocks, a feature that typifies the Asian markets, can also be exploited if correctly understood. Given the income orientation of the portfolio, he is seeking to identify companies with sustainable or growing dividends.

Portfolio Construction & Risk Controls

The fund typically features 60-80 stocks, with the manager aiming to maintain a balanced portfolio which is well-diversified at a country and sector level. He is aware of the benchmark but operates with a high degree of flexibility. Furthermore, the income mandate naturally results in structural underweights in low yielding markets, such as South Korea. Cash is typically around 5% and portfolio turnover is reasonably low.

Investment Process

The process is very research-intensive, with the manager relying upon the in-house research capability of Schroders, as well as his large network of contacts and sell-side research. The focus is firmly upon companies with visible earnings, sustainable returns and solid valuation support. The research is driven by an extensive programme of company meetings, which focus upon the future management strategy, the competitive position of the company, barriers to entry and how shareholder wealth is created. The analysts use standardised models to generate cashflow and earnings estimates to evaluate a company's ability to meet strategic goals. Stocks are ranked from 1-4, with 1 a strong buy. The manager typically sources ideas from stocks ranked 1 and 2. Given the income orientation, the manager favours companies with strong income and capital growth potential that offer steady or sustainable yields. Around 10% of the portfolio can be committed to low or non-yielding stocks, which may be the beneficiaries of management change or restructuring. While the investment view is primarily driven by bottom-up insights, country allocation is considered through a top-down overlay. As part of the buy and sell discipline, he takes into account analysts' stock rankings and price targets.

Key Fund Facts

Inception Date:

09 October 2019

Manager(s) (Since):

Richard Sennitt (Nov 01)

Fund Domicile:

United Kingdom

Base Currency:

£ Sterling

Fund Benchmark:

MSCI AC Pacific ex Japan

IA Sector:

Asia Pacific excluding Japan

*The mandate was altered to an income objective in December 2006.

Formal documentation, including the fund prospectus and the KIID, should be sought directly from the asset manager. For ease of reference, a link to the ASSET MANAGER WEBSITE can be found above, as well as a link to the ASSET MANAGER FACTSHEET.