Fund spotlight: Guinness Asian Equity Income
interactive investor's analysts give an update and view on the Guinness Asian Equity Income.
26th September 2019 13:34
interactive investor's analysts give an update and view on the Guinness Asian Equity Income.
Asia has become almost a 'safe-haven' region for investors, with stable and reform-focused governments in the main economies of the region such as China and India. In contrast, there is great uncertainty in developed markets following Donald Trump's election as president of the US, Britain's decision to exit the EU and ongoing political events in Europe.
Despite the backdrop of the US–China trade war, the long-term drivers of Asian economic growth remain intact. The region is a mix of advanced, high-income economies and newly industrialised countries with a rising middle class and higher GDP growth. Asian corporate earnings growth has outpaced that of both global and US equities over the past 20 years.
Investing in Asia provides many opportunities for investors to buy into high quality businesses at attractive prices in order to generate both growth and income.
The fund
Guinness Asian Equity Income Fund aims to provide long-term capital growth and sustainable income by investing in high quality dividend-paying companies in the Asia Pacific region.
The fund has been managed since its launch in 2013 by Edmund Harris, who has been investing in Asia for more than 25 years.
He is assisted by co-manager Mark Hammonds and analyst Sharukh Malik.
By focusing on bottom up, fundamental research, the managers try to identify high quality companies that have, in the short term, fallen out of favour, but that have previously shown an ability to weather most economic environments over time.
In selecting stocks, they look for three characteristics: quality, value and dividends. They focus on profitable companies that have generated persistently high returns on capital and demonstrated stability and resilience over an eight-year period; companies whose shares under-price the likely persistence of those returns on capital; and firms that can sustainably grow their dividends in the future. The managers believe that strong cash generation and its distribution as dividends also provide a degree of downside protection against volatility in local markets.
What's in it?
The fund is a high-conviction portfolio of 36 equally-weighted positions with a minimum market capitalisation of $500 million. It has low turnover and no benchmark-driven constraints on sector and regional weightings. This, together with their one-in, one-out policy, provides a good balance between the benefits of diversification while also allowing each company to add meaningfully to performance.
It currently has around £172 million in assets under management with 27.2% of its assets invested in China and 20.7% in Taiwan. The main sectors of focus are in Technology (26.6%), Financials (23.2%), and Consumer Discretionary (16.2%).
Among its top holdings are pharmaceutical service provider China Medical Systems, Taiwan-based base metal manufacturer Elite Material as well as Australia's home entertainment retailer JB Hi Fi (ASX:JBH).
How does it perform?
Since inception, the fund has delivered consistent performance with an attractive level of income. It currently offers a 4.1% yield.
| 01/09/2018 - 31/08/2019 | 01/09/2017 - 31/08/2018 | 01/09/2016 - 31/08/2017 | 01/09/2015 - 31/08/2016 | 01/09/2014 - 31/08/2015 | |
|---|---|---|---|---|---|
| Guinness Asian Equity Income | -0.40 | 0.93 | 25.58 | 32.76 | 1.06 |
| MSCI AC Pacific Ex Japan Index | 1.87 | 1.84 | 25.77 | 33.67 | -13.21 |
| Morningstar Asia-Pacific ex-Japan Equity Income Sector | 3.81 | 0.48 | 18.04 | 31.60 | -10.31 |
Source: Morningstar Direct as at 31st August 2019. Total returns in GBP
ii view
Guinness Asian Equity Income Fund features in the ii Super 60 list of high-conviction investment ideas as an Asian equity income recommendation. Managed by a highly experienced management team, the fund provides investors with exposure to high quality dividend‐paying companies in the Asia Pacific region. The fund has produced consistent returns since inception and its yield is attractive for income investors. Additionally, the fund offers investors the benefits of diversification away from UK. High portfolio concentration means it is higher-risk, so better as a satellite holding in a well-diversified portfolio.
- Find out why this fund is on the ii Super 60 investments list
- Click here for more information on this fund, including price, yield and charges
If you enjoyed this article, you may also like other funds picked for interactive investor's Super 60 range of high-conviction investment ideas. Click here to find out more.
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