Fund to watch: Jupiter Asian Income
Investors should usually ignore new fund launches. Usually, until a fund has a decent track record it’s not worth looking at because there is so much choice already.
However, fund managers with outstanding track records who jump ship to other groups and then launch similar funds are worth considering. And if the manager operates in an investment area where there isn’t as much choice, the new fund should have more appeal.
Between November 2005 and April 2015, Jason Pidcock turned Newton Asian Income fund into one of the country’s most popular Asian funds. Over this period, the fund performed better than the FTSE Asia Pacific ex-Japan Index, the average Asia Pacific fund and the FTSE All-Share Index.
He is now hoping to replicate his excellent performance record with Jupiter Asian Income, which launches today.
The fund is being plugged as a ‘buy’ by DIY investment platform Hargreaves Lansdown, which has put it straight into its recommended funds list, the Wealth 150. However, other commentators are more cautious and want to see evidence of a good track record before buying the fund.
Mr Pidcock says he will manage the fund using the same process used on his former Newton Asian Income fund. He will invest in companies listed in the Asia Pacific region, including Australia and New Zealand, and excluding Japan.
However, he will have more flexibility to buy shares in companies that pay out lower levels of income in order to capture the best growth opportunities on offer. This will mean he can buy companies based in the Philippines, a market that he thinks has huge potential for growth based on a young population that has money to spend. He can also buy Asian healthcare companies that offer superior growth opportunities but don’t pay out very much income to investors.
The fund will pay out income every quarter and it aims to pay out 4.2% income per year.
Investors should consider diversifying some of their income sources away from the UK and Asia is particularly appealing. Asian companies have developed a culture of paying out dividends to shareholders, meaning there are lots of income opportunities in the region.
Dividend paying companies tend to have stronger investment cases. It is a sign that the company is being managed well when it acknowledges that is has an obligation to share yearly profits with shareholders.
It could be a good time to buy an Asian fund as the stock markets have fallen and valuations are lower than they have been for some time.
Jupiter Asian Income looks like it has good potential based on its manager’s track record. There is always a risk that a new corporate culture might make a manager wobble at the start so more cautious investors should wait and see how the first year pans out.
If you don’t want to take the risk of a new fund, a decent option with a long track record is Legal & General Asian Income. This fund is managed well and also pays a high income.
If you own shares in a company, you’re entitled to a slice of the profits and these are paid as dividends on top of any capital growth in the shares’ value. The amount of the dividend is down to the board of directors (who can decide not to pay a dividend and reinvest any profits in the company) and they will be paid twice yearly (announced at the AGM and six months later as an interim). Dividends are always declared as a sum of money rather than a percentage of the share’s price. Although dividends automatically receive a 10% tax credit from HM Revenue & Customs (HMRC), which takes the company having already paid corporation tax on its profits into account. Dividends are classed as income and, as such, are liable for personal taxation and so shareholders have to declare them to HMRC.