Invesco Perpetual is drawing together its Asian equity and equity income expertise with its Asian Equity Income Fund.
The fund, to be launched in March, aims to provide investors with a rising level of income and long-term growth by investing in the equities of companies in Asia and Australasia excluding Japan.
Invesco Perpetual believes that as the driving force behind global growth, Asia is a good hunting ground for equity income, providing diversification across countries, sectors and stocks. Domestic growth, as well as internationally provides Asian firms with strong earnings potential that will generate revenue and profits. Dividends are also rising in the region as corporate governance improves, so that more companies are understanding the importance of shareholders.
The fund will be managed by Invesco Perpetual head of Asian equities Stuart Parks and Asian equity fund manager Tim Dickson. Parks will be responsible for the top-down asset allocation of the fund in terms of regions and sectors, while Dickson will carry out bottom-up stock selection.
The managers will target a dividend yield of 120 per cent of that of the MSCI AC Asia Pacific ex-Japan Index. They will take a selective and unconstrained approach to stockpicking, focusing on undervalued firms that can grow earnings and dividends. They believe that choosing firms only on the basis of immediate dividend yield is not enough. They are not interested in firms that will put capital at risk or where dividends eventually fall away, so they also take into account the sustainability of dividends and dividend growth.
The fund’s dividend yield at launch is expected to be almost 4 per cent. To achieve this, firms that pay high dividends will be at the core of the portfolio but investment will also be made in companies with greater growth prospects that are capable of increasing dividends over time.
Fund management groups have been exploring alternatives to UK equity income for several years as a way of diversifying to achieve a better yield, but there are still relatively few funds with an Asian slant so a new entrant will increase choice.
One of the more established Asian equity income funds, the Newton Asian equity fund, could provide competition for Invesco Perpetual. The Newton fund is over five-years old and has been performing well since the lows of late 2008 and early 2009.