The region has also been the leader, outside of developed markets, in dividend payouts, making Asian income funds an excellent diversifier.As a result, Asia Pacific funds are no longer viewed as the preserve of the experienced investor. With this in mind, Bestinvest’s Jason Hollands (pictured) tips five funds that are suited to people who are new to the industry.
Aberdeen Asia Pacific & Japan
Although Japan is often segregated into its own sector, Hollands says first-time investors should consider putting their money into a fund that includes the island nation.
"For the first-time investor, you should look at a fund that invests right across the region, including Japan," he said.
He adds that this approach is well suited to investors who have smaller amounts to invest, giving them the diversification without having to put higher amounts in separate Asia Pacific and Japan portfolios.
The standout performer in this space is undoubtedly the five crown-rated Aberdeen Asia Pacific & Japan fund, according to Hollands.
| Name | Aberdeen Asia Pacific & Japan |
|---|---|
| Fund size | £305.3m |
| Min. investment | £500 |
| OCF | 1.80% |
| Yield | 0.90% |
| Manager | Aberdeen Asian equities team |
| Crown rating | 5 Crowns |
Source: FE Analytics
The fund is headed up by Aberdeen’s Asian equities team and is a top-quartile performer over three, five and 10 years.
The fund has made 317.29 per cent over the last decade compared with 228.8 per cent from the IMA Asia Pacific inc Japan sector and 195.09 per cent from the MSCI Asia Pacific index.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund's highest sector weighting is to financials, at 28.5 per cent.
Among its top holdings are Samsung Electronics, HSBC and global mining corporations Rio Tinto and BHP Billiton.
Invesco Perpetual Pacific
Hollands says his second choice for broad Asia Pacific exposure would be the £206.5m Invesco Perpetual Pacific fund.
| Name | Invesco Perpetual Pacific |
|---|---|
| Fund size | £206.5m |
| Min. investment | £500 |
| OCF | 1.71% |
| Yield | 0.44% |
| Manager | Stuart Parks |
| Crown rating | 2 Crowns |
Source: FE Analytics
Over the last 10 years, the fund has gained 296.34 per cent, beating the IMA Asia Pacific inc Japan sector by more than 60 percentage points.
The portfolio is benchmarked against Lipper FE (including Japan), which is not covered by FE Analytics.
As a basis of comparison, the MSCI Asia Pacific index gained just 195.09 per cent in this time.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund is also top-quartile over one and five years. It outperformed both the sector and index over three years, but is third-quartile over this period.
Samsung Electronics is the number-one holding in the fund, and its highest sector weighting is to the telecommunications, media and technology sector.
It also has a high exposure to financials, with Japanese firms Nomura and Sumitomo Mitsui Financial Group featuring in its top-10 holdings.
Stuart Parks has headed up the fund since 2000.
First State Asia Pacific Leaders
Hollands says investors with a bit more cash to spare should consider a leading portfolio such as First State Asia Pacific Leaders and couple it with a Japan fund.
The five crown-rated portfolio is one of the most popular in the sector, with £7.3bn in assets under management.
| Name | First State Asia Pacific Leaders |
|---|---|
| Fund size | £7.3bn |
| Min. investment | £1,000 |
| OCF | 1.55% |
| Yield | 0.25% |
| Manager | FE Alpha Managers Angus Tulloch and Alistair Thompson |
| Crown rating | 5 Crowns |
Source: FE Analytics
The fund is well-deserving of its reputation, having delivered stellar returns over one, three and five years.
Since launch in December 2003, the fund has made an impressive 341.03 per cent while the IMA Asia Pacific ex Japan sector has gained 218.61 per cent. The FTSE Asia Pacific ex Japan index picked up 255.82 per cent in this time.
Performance of fund vs sector and index since launch
Source: FE Analytics
Among the fund's top bets are Hong-Kong based Cheung Kong Holdings and Hong Kong & China Gas, though its largest sector weighting is to financials.
It is run by FE Alpha Manager duo Angus Tulloch and Alistair Thompson.
Schroder Asian Alpha Plus
With the massive size of many of the First State and Aberdeen funds, Hollands says he is constantly looking for a fund that can replace the leaders once they inevitably soft-close.
"The First State funds are quite big now, so we are always on the hunt for another fund that can dovetail from that," he said.
His top pick outside the two leaders is the five crown-rated Schroder Asian Alpha Plus fund, managed by Matthew Dobbs.
| Name | Schroder Asian Alpha Plus |
|---|---|
| Fund size | £492.6m |
| Min. investment | £1,000 |
| OCF | 1.70% |
| Yield | 0.24% |
| Manager | Matthew Dobbs |
| Crown rating | 5 Crowns |
Source: FE Analytics
The £492.6m fund has outperformed the IMA Asia Pacific ex Japan index over three and five years and performed in line with the index over one.
It has also beaten the MSCI Far East ex Japan index over one, three and five years.
Since launch in November 2007, the fund has gained 79.36 per cent while the sector and index have made 36.73 per cent and 40.8 per cent respectively.
Performance of fund vs sector and index since launch
Source: FE Analytics
Newton Asian Income
For investors looking to diversify their income stream, Hollands says there is no better fund in the Asia Pacific region than the five crown-rated Newton Asian Income portfolio.
| Name | Newton Asian Income |
|---|---|
| Fund size | £3.9bn |
| Min. investment | £1,000 |
| OCF | 1.16% |
| Yield | 4.26% |
| Manager | Jason Pidcock & Caroline Keen |
| Crown rating | 5 Crowns |
Source: FE Analytics
Managed by Jason Pidcock and Caroline Keen, this £3.9bn fund has doubled the returns of the FTSE Asia Pacific ex Japan index and its sector over three and five years.
Since launch in November 2005, the fund has gained 193.42 per cent while the sector and index have made 128.43 per cent and 139.11 per cent respectively.
Performance of fund vs sector and index since launch
Source: FE Analytics
It is yielding 4.26 per cent.
Pidcock and Keen are backing major blue chips in the region such as Taiwan Semiconductor Manufacturing and Samsung Electronics.
They also like Thai bank Bangkok Bank Public and auto-manufacturer Hyundai Motors.
The highest sector weighting in the fund is to financials while the Pacific Basin, at 83.2 per cent, is easily the highest regional weighting.