193. Investing for income in Asia
Richard Sennitt, manager of Schroder Oriental Income Fund, talks about the regulatory issues in...
The tax year deadline is looming but, for many of us, investing our annual ISA allowance is still sitting on the ‘to-do list’. If you’re a bit stuck for ideas this season, we’ve asked the FundCalibre experts where they’re putting their money.
“With the UK on the verge of triggering Article 50, the US market trading around record highs and the French election ahead, I’m playing it fairly safe this ISA season. An absolute return fund can be an excellent way to add some protection to your portfolio and I’ve gone with Smith & Williamson Enterprise, which aims to deliver equity-like performance but with half the volatility of the UK equity index. I particularly like this fund because it has a history of performing well in rising markets too, which not all absolute return funds do. This makes it a nice option for those who want to ‘hedge their bets’. For my kids’ Junior ISAs, I’m happy to take a bit more risk as they have a long-term time frame and I’ve chosen Goldman Sachs India Equity Portfolio.”
“With today’s inflation figures coming in at 2.3%, bonds and cash are likely to be hard hit this year. I think one of the best things savers can do is to allocate some of their ISA allowance to equity funds that take a bit more risk to deliver long-term growth potential. I’ve chosen Baillie Gifford Global Discovery, whose manager Douglas Brodie has a true focus on finding the most innovative and fast-growing businesses.
“Meanwhile central bankers around the world continue to ‘experiment’ with monetary policy and I’ll certainly be putting some of my money into BlackRock Gold and General as a bit of an ‘insurance policy’ in case they get it wrong!”
“India is my pick for a good growth story this ISA season. The goods and services tax bill that was passed last year is due to be implemented in July and should add meaningfully to government tax revenues over the coming years. Plus prime minister Narendra Modi’s reform mandate has been strengthened by his party’s strong victories in recent state elections.
“In a higher risk market like India, you want to go with an experienced manager who has a strong track record and exceptional local knowledge, and the team behind Ashburton India Equity Opportunities fit the bill. The fund invests in no more than 20 to 30 companies, so you really are getting their best ideas.”
“Although there is uncertainty in global markets right now, economic growth has been picking up and I’m actually feeling quite positive. One region I think is set to benefit from a global recovery is Asia. Companies here have been hard hit over the past five years and an element of catch-up is not unreasonable. Schroder Oriental Income Fund has consistently provided excellent returns and the manager’s 30+ years of experience are a huge asset.
“In a low interest rate environment, investment trusts generally can be a good way to invest for income, as their ability to put aside some dividends each year into a revenue reserve means they may be able to pay their shareholders a more consistent income in good and bad years.”
“Like Darius, I think an allocation to absolute return funds doesn’t hurt right now. I’ve chosen Church House Tenax Absolute Return Strategies, which is a solid multi-asset fund. It is very sensibly put together, which helps protect the fund in down markets but means the portfolio is still positioned to try and make some money in rising markets too. I’m also holding Standard Life Investments Emerging Market Debt in my ISA. I don’t see a lot of good opportunities in the corporate bond space right now, but emerging market bonds offer higher yields to compensate investors for the extra risk they are taking – and in the Standard Life fund, the manager Richard House’s competence and diligence give me confidence he makes his choices wisely in what can be quite tricky markets.”
“I’m with Juliet and Darius on India’s prospects – I think that country really is the best growth story of our generation. I’ve gone with Goldman Sachs India Equity Portfolio, because I like its very broad exposure to companies of all sizes. This fund holds around 80 to 90 companies and makes an excellent ‘all-weather’ investment, in my view. I’ve also put some money into UK smaller caps by way of Wood Street Micro Cap, which I think was oversold last year after the Brexit vote. Run by the specialist smaller companies team at Livingbridge, the fund has a track record of finding and investing in some of Britain’s most entrepreneurial businesses in the early stages.”