Stuart Parks, the group’s head of Asian equities, is looking at the possibility of an aggressive, high conviction Asian opportunities fund and an Asian equity income fund, in response to demand from clients.
It is likely that Parks would run the opportunities fund, while another member of his team would manage the equity income fund. The products are not yet being run as model portfolios, although Parks has been considering them since late last year.
He says: “We think that the product line-up we have at the moment is based on providing diversified exposure to the Asian region. Over time it might make sense to have a more concentrated high conviction portfolio which would suit a different type of investor, just as we have the UK aggressive fund which sits alongside and complements UK growth and income and growth.”
The equity income fund would aim to capitalise on an improving outlook for dividends in the Asian market.
Parks says: “If you look at payout ratios, they have improved over time in Asia. Companies are much more likely to use cash flow to pay out to investors.”
He adds that attractive valuations in several Asian currencies mean they are useful ways to pay income and enhance returns for investors.
“Because Asian currencies are undervalued, if you get appreciation of Asian currencies against sterling. A sterling investor would over time get an income stream and an enhancement of that income stream as currency,” he says.
Parks says the investment story in Asia remains compelling, notably in China, despite fears of a bubble.
He says: “If you look at the building blocks for sustainable economic growth over time, China has them – a relatively young population that wants to work hard to make money, and a government that is proactive in stimulating the economy.
“Over time, the Chinese economic model will be much more domestic led than export led.”
Parks says concerns over a bubble are “exaggerated” and that the exuberance in Chinese asset prices is caused by a “pressure cooker” effect as people try to reinvest their money within the country.