Schroder Asian Income

Schroder Asian Income fund uses the experience and depths of Schroder’s regional presence and research team to find companies that offer attractive yields and growing dividend payments. The fund will invest in the Asia Pacific region, including Australia and New Zealand, but excluding Japan. Manager Richard Sennitt has a flexible mandate and aims to maintain a well-diversified portfolio of income streams to generate a 3.5% to 4% yield.

Our opinion

The investment process is well thought out and has been implemented with diligence and skill. Richard's experience, combined with the strength and depth of Schroders' analyst team, make this fund stand out. Asia Pacific is often overlooked for income, despite having higher yields than many other regions in the world. This is potentially a core holding for those looking for Asian income.

Fund manager

Richard Sennitt joined Schroders in 1993 and has managed the Schroder Asian Income fund since 2001, although it has only been in its current form since 2009. He has a wealth of experience managing Asian equities and is supported by Schroders' analyst resources, some of whom are based in the region.

Asian markets remain an attractive hunting ground for income seekers. We look for good quality, competitively priced businesses that are able to grow and maintain their dividend payouts.

Richard SennittFund manager

Investment process

Richard benefits from the large Schroders research team, whose analysts are based on the ground across Asia. Ideas are generated from company visits, sell-side research and quantitative screens. Fundamental company analysis drives stock selection in the portfolio. Suitable candidates are subjected to detailed qualitative analysis. Valuation and the sustainability of the dividend are important factors, and also contribute to the manager's sell discipline. The quality of the management is also an important consideration. The team will also look for potential catalysts which can drive a stock’s performance. Schroder Asian Income is a pragmatic fund, and Richard employs a macro-economic country framework to help mitigate potential risks.

ESG

ESG - Integrated
ESG factors are integrated throughout the investment process for the whole of the Schroders fund range. The process begins with the ‘SustainEx’ tool which has been developed in-house by a 25-strong central ESG team.

SustainEx quantifies the positive and negative impacts companies have on society. It has won a number of awards and continues to be upgraded all the time. Most approaches measure impact relative to a benchmark, whereas SustainEx calculates a quantifiable overall impact. There are over 45 positive and negative externalities which have been drawn from over 400 academic studies and are applied to 9,000 global companies. The tool helps fund managers to identify previously unaccounted for ESG risks and helps them to build these risks into their valuation framework. Each individual strategy has its own ESG specialist on the team.

In addition to SustainEx, analysts also use the Context tool which allows them to add their own input. It is also used in the valuation process, with higher discount rates applied to weak ESG companies. Some companies’ ESG will be so weak that they are considered uninvestable. ESG also helps shape portfolio construction: those stocks with a higher ESG risk may have a reduced weight in the portfolio, or if the risk is high enough, no position at all.

Risk

The portfolio is well diversified and typically holds 60-80 stocks. As the fund invests in the Asia region, which consists of many developing markets, it is likely to be more risky than an investment in a developed market equity fund, such as the UK. However, the manager's preference for income-paying stocks means the fund is likely to be less volatile than some other Asian-focused funds. Investors should also be aware of the currency risk.

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