Jupiter Asian Income: November 2020 fund update

Kate Marshall | Wed 16 December 2020

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• Jason Pidcock has an eye for detail, focusing on both company specifics and wider economic trends
• An emphasis on income adds something a little different to most Asian funds that focus on growth
• The manager has a long and successful track record investing in Asia for income
• This fund is on our Wealth Shortlist of funds chosen by our analysts for their long-term performance potential

How it fits in a portfolio

The Jupiter Asian Income fund aims to pay a regular income and grow an investment over the long term. It mainly focuses on more developed Asian markets, such as Hong Kong and Taiwan. We think the fund could form part of an income portfolio, or help to diversify the Asian portion of a broader global portfolio. If you choose to reinvest any income, it could boost future growth potential. Investing in Asia, along with the flexibility to invest in some emerging markets, makes it a higher-risk option.

Manager

Jason Pidcock started running funds investing in Asian companies in 1996, and spent three years prior to this analysing and investing in the region. In 2005 he set up BNY Mellon Asian Income (previously Newton Asian Income) and became one of the first UK fund managers to run an Asian fund focused on income, rather than purely growth. He built a strong reputation from running this fund, before he left in 2016 to set up Jupiter Asian Income.

Pidcock is the sole manager on this fund and dedicated to this single strategy. He also collaborates with some of the wider investment team at Jupiter in order to discuss ideas and get additional input. We view him as a meticulous investor with a focus on the finer details, and we like that he's aware of both his strengths and weaknesses.

Pidcock has recently taken on a role as co-ordinator of the global equities team at Jupiter. This is not a managerial role, but should encourage the sharing of information about global companies and themes among the team. We don’t think this change will take up the manager’s time and could ultimately help him see better what themes are occurring in what is an increasingly global competitive landscape.

Process

Pidcock believes investing in companies that generate strong profits and growing dividends is the best way to achieve good returns over the long run. He thinks companies that are willing to share a portion of their profits as dividends care most about the interests of their shareholders.

This fund's main aim is to provide an income at least 20% higher than the fund's benchmark, the FTSE Asia Pacific ex Japan Index. It also aims to provide greater capital growth than this benchmark. To do this, the manager looks for companies that pay an attractive income, and have the potential to grow dividends over time. He also invests in some companies that pay a lower income, but have greater growth potential.

Companies that make plenty of cash, have low levels of debt and are in good financial health are favoured. They should also be run by robust management teams, and having regular contact with them is key to the manager's process. The manager also considers wider economic themes in his analysis, and takes note of the political landscape which he feels has a bearing on what occurs in different economies.

We like the fact Pidcock keeps things simple with this fund. He sticks to his tried-and-tested philosophy, and doesn't do anything complicated in the pursuit of short-term gains that could compromise long-term performance. More and more Asian companies are starting to pay dividends, and he simply aims to take advantage of this.

He mainly focuses on larger businesses in developed Asian markets, such as Hong Kong, Singapore and Australia. The fund can invest in emerging markets as well, and currently has some exposure to markets such as India and China. It also invests in a fairly small number of companies, currently 31, and both of these factors increase risk.

Chart showing Jupiter Asian Income's country allocation

Source: Jupiter, correct at 31/10/2020.

Like many fund managers, Pidcock has made a number of changes to the fund this year as the coronavirus pandemic has changed the outlook for many companies (both good and bad). It’s also created market volatility, which has allowed managers to invest in companies at lower share prices.

This year he added to companies in the consumer space, including ITC, an Indian company involved in a number of consumer areas such as food and personal care. Other new investments include food and beverage businesses Thai Beverage, Want Want and Coca-Cola Amatil.

On the other hand the fund’s exposure to Australia has continued to fall as the manager has found better opportunities elsewhere. He’s reduced investments in property and banks, and recently sold Westpac. Treasury Wine Estates and casino operator Star Entertainment have also been sold. Australia currently makes up 14.6% of the fund. On a longer-term view he expects the exposure to be around 20%, and not as high as it’s been in the past.

Culture

We think the culture at Jupiter is attractive. Fund managers are given autonomy to invest the way they see fit and believe will benefit investors over the long run, but with an appropriate level of challenge from others in the business. The business setup allows Pidcock to focus on fund management and maintain flexibility.

All fund managers at Jupiter receive support from the Sustainable Investing and Governance Research teams. While this is not an ESG-specific fund (Environmental, Social and Governance), Pidcock takes the team’s views into account and has always focused on companies with good governance standards.

The manager invests his own money in this fund and we think he’s incentivised in a way that could maximise long-term performance, meaning his interests should be aligned with those of his investors.

Cost

This fund is available at a net ongoing fund charge of 0.69%, after a 0.29% discount available through the HL platform. The usual ongoing charge is 0.98%. This makes it one of the lowest cost funds available in the Asia Pacific ex Japan sector through HL. The fund discount is achieved through a loyalty bonus, which could be subject to tax if held outside of an ISA or SIPP. The HL platform fee of up to 0.45% per year also applies.

Performance

It’s been a tough year for income funds. Many investors have favoured companies expected to deliver higher or more sustainable levels of growth, such as technology or other internet-based companies, and this has benefited funds with a growth-focused approach. However, this type of company often pays little or no dividend, meaning income funds that can’t invest in these companies have been left behind.

That’s not the only thing that’s impacted this fund. Earlier in the year investments in property-related companies, such as offices, retailers, casino and hotel operators, as well as toll roads were held back due to the containment measures put in place by governments as a result of the coronavirus. Pidcock reassessed his outlook for these companies and some have since been sold from the fund.

The manager’s focus on larger, quality companies that tend to generate cash at a steadier pace than others means we expect the fund to hold up relatively well when markets go through a tough patch. This won't necessarily happen all the time though, as we saw during the market setback in March. We expect the fund to hold up better over longer periods, and Pidcock's funds have performed better than the broad Asian stock market over the length of his career. Past performance isn't a guide to the future though.

The fund has paid an attractive annual income so far since launch, and its yield has also remained comfortably ahead of the FTSE Asia Pacific ex Japan Index. That said, a challenging year means many companies have had to cut or suspend dividends, meaning the income paid will be lower for the year.

Pidcock expects dividends to grow next year though as the world starts to recover, and some companies will be in a more stable position. This is particularly true of Asia where some economies have generally coped with the virus better and are already returning to some form of normality. It won’t necessarily be a smooth ride though, and remember dividends are variable and yields are not guaranteed nor an indicator of what you might get paid in future. The fund’s charges are taken from capital, which could increase the yield but reduces the potential for capital growth.

Past performance is not a guide to the future. Source: Lipper IM to 31/10/2020.

N/A* – full year date is not available for this period.

Find out more about Jupiter Asian Income including charges

Jupiter Asian Income Key investor information