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Schroders follows the orient

The Schroder oriental income trust is an investment trust designed to take advantage of dividend growth in the Asia Pacific region.

The funds objective is to deliver income with the potential for capital growth. It has a target yield of 4.25-4.5 per cent and will invest in around 40 companies from areas such as Australia, India, Hong Kong and Japan. The portfolio will focus on equities, although it has the flexibility to invest in bonds and cash if the fund manager sees fit.

The fund will be managed by Schroders executive director Matthew Dobbs, who has over 20 years experience in Pacific Basin equities. He joined Schroders in 1981 and has worked for the company from bases in Singapore and New York. He has managed the Schroder Asia Pacific trust since launch in 1995.

According to Schroders, dividend yields in Asian markets are now at the same level as the UK. It says that since the Asian crisis in the 1990s, companies have been repairing balance sheers and boosting profits which has helped sustain future dividend payments.

Dobbs will look for companies where the share price does not reflect growth potential. When selecting holdings, the investment universe will be screened and company visits will be made. Dobbs will draw on research from 26 fund managers and 34 analysts within the Schroders group and will also consider factors such as the quality of a companys management, whether it has a competitive advantage in its market, valuation, cash flow and likely growth prospects relative to risk,

Reference will also be made to developments within the global economy and the wider industry issues which could affect each stock. Stocks will be sold when they are trading at or above Schroders target price, where a more attractive stock is found or there are changes in the industry or the company.

Growth in Asian markets is expected to happen at a faster rate than western markets and dividend payments are increasingly common from cash-rich companies, particularly those in the financial and telecommunications sectors.

However, there may be a feeling among IFAs that the UK is still a better bet for clients looking for income.


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