Newton Asian Income and Emerging Income Funds research update
Kate Marshall | Fri 26 June 2015
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On 22 May 2015, it was announced Jason Pidcock would step down as lead manager of the Newton Asian Income Fund and as co-manager of the Newton Emerging Income Fund. At the time we felt it prudent to remove the funds from the Wealth 150 as we had initially supported the funds because of the experience and talent of Jason Pidcock, an established Asian equities investor.
In light of this management change, we recently met Newton's Emerging and Asian Equity team, which now falls under the leadership of Rob Marshall-Lee. Jason Pidcock has now left the group and this brings the Asian Income Fund under the responsibility of the wider team, rather than having a lead manager at its helm. Caroline Keen, who was alternate manager on the fund from July 2011, also maintains an integral role in the fund's management.
On the Emerging Income Fund, Sophia Whitbread has been appointed lead manager. She was previously co-manager of the fund alongside Jason Pidcock since its launch in October 2012. This fund is a fairly concentrated portfolio which enables each holding to make a significant impact on returns, although this is a higher-risk strategy.
Overall, the funds will continue to be run using a team-orientated approach. The team will maintain their long-standing thematic investment approach, and will continue to focus on high-quality companies with established business models in both portfolios. They anticipate they will only make marginal changes to the portfolios following Jason Pidcock's departure, and will also look to hire another Asia-dedicated member of the team in due course.
We also discussed recent performance with the team, as both funds have underperformed their respective benchmarks so far this year. Given the funds' income focus, they have a natural bias towards larger, high-yielding companies, but this area of the market has underperformed higher-risk smaller and lower-yielding counterparts.
The funds' limited exposure to China has also held back returns, as has a lack of exposure to India, which offers few dividend-paying opportunities. These countries' stock markets have made strong ground over the past year, meaning the funds have missed out on these gains. Furthermore, they have seen disappointing performances from stocks including Macau gaming companies, Sands China and Wynn Macau.
Our view on these funds
Newton has demonstrated a commitment to long-term investing in the adventurous Asian and emerging markets regions. We are pleased to see the team remain enthusiastic about the income opportunities present and that they will maintain their existing strategy, which has proven successful historically. As a result, we do not anticipate any significant changes will be made to the portfolios. They will also continue to have the backing of Newton's large bank of analyst resource.
That said, we have decided not to reinstate the funds to the Wealth 150 list of our favourite funds across the major sectors at this time. Jason Pidcock was an established member of the team at Newton, and we view his departure as a loss for the remaining team. We would prefer to see how they fare under the leadership of Rob Marshall-Lee and monitor the funds for a period of time before reconsidering their position.
Please note the funds' charges can be taken from capital which can increase the yield but reduces the potential for capital growth.
Find out more about the Newton Asian Income Fund including how to invest
Please read the key features/key investor information document in addition to the information above.
Find out more about the Newton Emerging Income Fund including how to invest
Please read the key features/key investor information document in addition to the information above.