Newton edges Schroders in Asian income space
While there is little to choose between the two funds, Jason Pidcock’s portfolio has garnered significantly more interest from investors.
For investors seeking income in more volatile sectors, two emerging market funds stand out, and our analysis shows it is hard to separate them.
Newton Asian Income
offers a yield of 5.06 per cent and has provided returns of 56.94 per cent over the past five years, according to data from FE Analytics
Schroder Asian Income
pays out 4.68 per cent and has made 52.02 per cent over the same period.
The Newton fund pulls away over three years however, returning 90.54 per cent against the Schroders fund’s 65.4 per cent.
Performance of funds vs sector
Source: FE Analytics
||1-yr returns (%)
||3-yr returns (%)
||5-yr returns (%)
|IMA Asia Pacific ex Japan
|Newton - Asian Income
|Schroder - Asian Income
Both have five FE crowns and a total expense ratio (TER) around the sector mean – the Newton fund's is four-tenths of a per cent cheaper at 1.66 per cent. Their levels of volatility are very similar as well.
In terms of performance and yield the Newton Asian Income fund has a slight edge, and perhaps for this reason it has been the most popular fund for new money over the past year.
It has experienced net inflows of £1.049bn in the past 12 months and is now the third biggest in the Asia Pacific ex Japan sector.
Newton Asian Income’s three-year results are higher than both of the two bigger funds in the sector – Aberdeen Asia Pacific and First State Asia Pacific Leaders, but the same is also true of Schroder Asian Income.
The Schroders portfolio has attracted relatively little attention, however – net inflows of just £45.5m leave its overall size at £198.5m, making it just over one-tenth the size of the £1.932bn Newton fund.
Richard Troue, investment analyst at Hargreaves Lansdown, said: "They are both good funds. I can’t think of any reason off the top of my head why inflows would be so much higher to the Newton fund."
"We have met the teams at both Newton and Schroders and hold them both in high regard."
"If anything we prefer the Newton Asian Income team. They take a very thematic view of the world and look for the companies that will drive growth in the future."
"The lead manager Jason Pidcock
has tended to have a lot invested in Australia, sometimes 20 to 25 per cent, which has been a big positive. Schroders doesn’t have so much, so I suppose it has more exposure to pure Asia."
Analysts often warn that funds that become too big can have liquidity issues and their results can tail off, but Troue believes there is no sign of such problems with the rapidly growing Newton portfolio.
"Newton Asian Income tends to have more in bigger companies, so from that point of view I don’t see it as a major problem."
"There are a couple of signs a fund is becoming too big. One is that the manager changes his style or his number of holdings, and the other is that he holds more and more in cash, but we see neither of these issues with Newton Asian Income."
This morning FE Trustnet research showed
that the UK Equity Income sector still has the most attractive yields on offer to investors, but Troue says that this shouldn’t stop investors looking abroad.
"You can pick up attractive yields on global companies, although it might be harder to find them, and the costs in other markets can be higher," he commented.
"The yield of five per cent on the Newton fund is attractive even compared to many UK funds."
"Plus, the fact that the banks stopped paying a dividend after the financial crisis, along with BP stopping after the problems in the US, has brought back the awareness that UK dividends are concentrated in a small number of companies."
"This means investors are very sensible to look for dividends overseas," he finished.
Both funds are available with a minimum initial investment of £1000.
The manager on the Schroders fund is Richard Sennitt